2 Pages Posted: 21 Oct 2008
George Lasiter sells special-events T-shirts and must decide how many to order for an upcoming concert. He has high, medium, and low estimates of both concert attendance and the percentage of attendees who will want a shirt. In addition, he has assessed the relative likelihoods of each estimate. The case can be used to introduce or reinforce the fundamental issues surrounding decision making under uncertainty.
For the past six years, George Lassiter, a project engineer for a major defense contractor, enjoyed an interesting and lucrative side business—designing, manufacturing, and hawking special-event T-shirts. He had created shirts for a variety of rock concerts, major sporting events, and special fundraising events. Although his T-shirts were not endorsed by the event sponsors and were not allowed to be sold within the arenas at which the events were held, they were cleverly designed, well produced, and reasonably priced relative to the official shirts. They were sold in the streets surrounding the arenas and in the nearby parking lots, always with the appropriate licenses from the local authorities. Lassiter had a regular crew of vendors to whom he sold the shirts on consignment for $ 100 per dozen. Those vendors then offered the shirts to the public at $ 10 apiece.
A steady stream of T-shirt business came to Lassiter, and he generally worked on several designs in various stages of development. His current problem centered around the number of shirts he should have stenciled for a rock concert that was scheduled to be staged in two months.
This concert was almost certain to be a huge success. Lassiter had no doubt that the 20,000 tickets for the standing area around the stage would be instantly bought by the group's devoted fans. The major unknown was the number of grandstand seats that would be sold. It could be anywhere from a few thousand to more than double the number of standing tickets. Given the popularity of the performing group and the intensity of the advance hype, Lassiter believed that the grandstand sales were more likely to be at the high rather than the low end of the spectrum. He decided to think in terms of three possibilities (a high, a medium, and a low value), specifically, 80,000, 50,000, and 20,000 grandstand seats. Despite his optimism, he believed that 50,000 was as likely as either of the other two possibilities combined. The two extreme numbers were about equally likely; although maybe 80,000 was a little more likelythan 20,000.
A second unknown was the percentage of attendees that would buy one of his shirts.To the credit of his designs and the quality of the shirts, the number generally (about six times out of ten) ran about 10% of the attendance, but sometimes it was in the range of 5%. On rare occasion, sales would be in the vicinity of 15% (maybe one time out of ten, if Lassiter's memory served him right).
Several weeks earlier, Lassiter had requested a cost estimate for this concert's design from the silk screener/shirt supply house with which he had been working for several years. He used this particular firm almost exclusively because he had found it to be reliable in both quality and schedule and to have reasonable prices. The estimate had arrived yesterday. It was presented in the usual batches of 2,500 shirts with the usual volume discounts (Table 1).
Table 1. Cost estimate.
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Keywords: decision making, product management
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