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Event Organizer Case: Conducting Events After the Pandemic, What Should We Consider?
Part 1: Cost and Attendance Trade Off
Diand, a famous event organizer has a plan to make a festival of blues music in Indonesia that will invite famous blues musicians all around the world. Initially, they wanted to hold this event in early 2020 but because of the pandemic they had to cancel the event. In 2021, assuming that the condition is getting better where the cases are already under control and start to decrease rapidly then the old plan comes to the Diand director’s mind once again. He has to decide whether the event will be held in the year of 2024 or 2025. He started to call all the board of directors (BOD) to discuss the plan.
First, they have to decide whether the event will be held in 2024 or 2025. If the BOD plans to hold the event in 2024 then there is a 60 percent possibility that the event will be canceled because of the worsening condition of the pandemic in Indonesia, meanwhile there is a 40 percent chance that the event will be canceled if the event is held in 2025. If the event is continued then they have to choose whether the event will be held in Bina Santika Building or
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Gelora 17 Agustus Stadium. Both buildings are considered as the determining factor to attract the blues music enthusiast.
The next thing, two main attributes are taken into consideration: the number of attendees and total costs. There are three possible responses from the market: (1) high response with potential 50,000 attendees; (2) medium response with potential 25,000 attendees; and (3) low response with potential 15,000 attendees. However, this number of attendees must be changed due to the capacity of the building with health protocol applied. If the event is held in the Bina Santika Building in 2024 then there is a 50% and 30% possibility that high and medium enthusiasm will occur respectively. Meanwhile, if the event is held in the Gelora 17 Agustus Stadium in 2024 then the possibility of high and medium response will be 40% and 35% respectively. The probability is changed to 60% and 20% for high and medium response if they hold the event in 2025 for both venues.
The other attribute that needs to be considered is about the cost to hold the event. There are several crucial budget posts that need to be carried out carefully since they will have the highest proportion in the budgeting. Those costs are: (1) cost to pay operational crew; and (2) cost to rent the event area.
In 2024, it is predicted that the cost to pay operational crew is Rp. 2,500,000 per person per event based on the report from Diand HR department. The chosen venue of the event will decide how many operational crew will be needed. They need 200, 150, 100 crew to hold the event in Bina Santika Building if the event is expected to have a high, medium, and low response respectively. On the other hand, they will need 1.5 times more the operational crew to hold the event in the stadium than in the building. The operational crew cost in 2024 and 2025 is expected to be the same.
Meanwhile, to pay the rent of the event area will vary based on the location. If the location chosen is Bina Santika Building then the rental cost will be Rp. 100,000,000 per event with the capacity is sufficient for 30,000 people. If the event is held in Gelora 17 Agustus Stadium then the cost will be Rp. 50,000,000 per event with the capacity is sufficient for 40,000 people. All the capacity mentioned above has considered the health protocol. These costs will apply in 2024 and 2025. However, there is a change in capacity for Gelora 17 Agustus Stadium and Bina Santika Building to 50,000 and 40,000 people respectively in 2025.
If the event is continued then the number of attendees and the costs that explained above will be calculated and considered accordingly. Otherwise, if the event is canceled because the pandemic outbreak started to worsen then only refund cost will be considered. The refund cost is determined by the early bird registration response from the blues listeners. There are two possible responses: positive or negative. Positive response of early bird registration will generate

more tickets to be sold than the negative response. Hence, the refund cost for the event cancelation will be higher if the event is responded positively. If the response is positive for early bird registration then the refund cost will reach Rp. 100,000,000 while otherwise the refund cost will reach only Rp. 50,000,000. In 2024, there is a 60% chance that the response for early bird registration is positive. Meanwhile, 40% possibility that the response for early bird registration is expected to be positive in 2025. If the cancellation happens, it will be considered that the event has no one attending.
At the early meeting, the director of Diand stated that he would be indifferent between the following alternatives:
A. I am indifferent between:
? paying Rp. 100 million for certain or
? a lottery that will give me a 0.7 probability of spending Rp. 50 million and a 0.3
probability of losing Rp. 800 million
B. ‘I am indifferent between:
? paying Rp. 350 million for certain or
? a lottery that will give me a 0.6 probability of spending Rp. 50 million and a 0.4
probability of losing Rp. 800 million
C. I am indifferent between:
? paying Rp. 425 million for certain or
? a lottery that will give me a 0.4 probability of spending Rp. 50 million and a 0.6
probability of losing Rp. 800 million
D. ‘I am indifferent between:
? paying Rp. 475 million for certain or
? a lottery that will give me a 0.3 probability of spending Rp. 50 million and a 0.7
probability of losing Rp. 800 million
E. I am indifferent between:
? paying Rp. 600 million for certain or
? a lottery that will give me a 0.2 probability of spending Rp. 50 million and a 0.8
probability of losing Rp. 800 million
F. I am indifferent between:
? paying Rp. 612,5 million for certain or
? a lottery that will give me a 0.1 probability of spending Rp. 50 million and a 0.9
probability of losing Rp. 800 million
G. I am indifferent between:

? attending by 40,000 people for certain or
? a lottery that will give me a 0.2 probability of having no attendees and a 0.8
probability of attending by 50,000 spectators. H. I am indifferent between:
? attending by 30,000 people for certain or
? a lottery that will give me a 0.25 probability of having no attendees and a 0.75
probability of attending by 50,000 spectators.
I. I am indifferent between:
? attending by 25,000 people for certain or
? a lottery that will give me a 0.5 probability of having no attendees and a 0.5
probability of attending by 50,000 spectators.
J. I am indifferent between:
? attending by 15,000 people for certain or
? a lottery that will give me a 0.7 probability of having no attendees and a 0.3
probability of attending by 50,000 spectators.
And after further questioning the director indicated that he would be indifferent between the following alternatives:
A : Conducting the event with the cost of Rp. 800 million, but which had a guaranteed to have 50,000 attendees or
B : A gamble which offered a 0.9 probability of cost as much as Rp. 50 million and a guaranteed to have 50,000 attendees and a 0.1 probability of cost as much as Rp. 800 million and a guaranteed to have no one attending the event.
Finally, the team leader said that he would be indifferent between alternatives C and D below:
C : Launching the magazine with certain to receive Rp. 50 million but which had a guaranteed to get 500 loss sales or
D : A gamble which offered a 0.4 probability of cost as much as Rp. 50 million and a guaranteed to have 50,000 attendees and a 0.6 probability of cost as much as Rp. 800 million and a guaranteed to have no one attending the event.
There are several tasks that you have to do in Part 1: Cost and Attendance Trade Off. The tasks are:
(a) Draw a decision tree to represent Diand’s problem
(b) Define the utility for Diand’s total cost and for number of attendees!

(c) Assuming that Diand’s objective is to minimize expected cost and maximize the number of attendees, what is your recommendation for policy that they should choose by using MAU methods?