# Siječanj 2009 - Upgrading gift companies. Is it worth it? (statistical analysis) ## Siječanj 2009 - Upgrading gift companies. Is it worth it? (statistical analysis)

Aloha readers. Let's go "in medias res". While crunching some numbers i
i want to share with you. The conclusion is that it isnt profitable to Productivity formula

W = 1/2 * A * B * C * D * E * F

Where,

W = Total Productivity Points
A = Skill Multiplier
B = Employee Multiplier
C = Wellness Multiplier
E = Trivia Multiplier
F = Company Quality Multiplier

The basic thesis of my research is that same employees will give you
same profit no matter the quality of your company. However it should be
that better quality implied bigger profit.
So you see that it doesnt matter what parameters i take for our workers
since we arent looking at their production per se, but the difference
they make in companies of different quality.

But to make it as realistic as possible lets take some realistic
situation. (again i stress that exact numbers arent important. They
could be 1 or billion but the results will always be the same)
So our company and workers will look like this:

A= skill = 3
B= employee multiplier = 2
C= wellness multiplier = 2.2
E= trivia multiplier = 1.5
F= company quality mult.= *this is a parameter we are looking at so it will be a variable

Also we need to define the price of q1, q2... gifts. We will take both empirical (from the research above) and idealistic data.

Empirical prices
q1= 0.051
q2= 0.098
q3= 0.201
q4=not enough data
q5=not enough data

From this data we see that q1 and q2 prices are pretty synchronized
while q3 prices are apsurd. It would cost same to buy 4 Q1 gifts or 1
Q3 gift. However in first choice you will receive 4 wellness and in
later only 3. This anomaly is probably due to unorganized markets or
lack of competition, and since it isnt trustable we will (for now)
ignore them.

Idealistic prices
For gain (wellness) it goes 2 Q1= 1 Q2, so prices must go accordingly. Same applies for higher qualities

q1=0.05
q2=0.1
q3=0.15
q4=0.2
q5=0.25

Quality 1
F= company quality mult.= 1
W=9.9
G=4.45

*Since it takes 2 productivity points to create 1 gift that means that G (gifts) is 4.45.

Empirical Profit = 4.95 * 0.051= 0.25245
Idealistic Profit= 4.95 * 0.050= 0.2475

Quality 2
F= company quality mult.= 0.5
W=4.95
G=2.475

Empirical Profit = 2.475 * 0.098= 0.24255
Idealistic Profit= 2.475 * 0.100= 0.2475

Quality 3
F= company quality mult.= 0.33
W=3.3
G=1.65

Empirical Profit = n/a (although empirical its not realistic)
Idealistic Profit= 1.65 * 0.15 =0.2475

Quality 4
F= company quality mult.= 0.25
W=2.48
G=1.24

Empirical Profit = n/a
Idealistic Profit= 1.24 * 0.2= 0.2475

Quality 5
F= company quality mult.= 0.2
W=1.98
G=0.99

Empirical Profit = n/a
Idealistic Profit= 0.99 * 0.25= 0.2475

There is one more thing we need to take into account and thats the
price of raw materials. But in the end the ratio of price of raw
materials and wellness (quality of product) we produce is the same for
every quality.

Now as you can see the idealistic profit is same for every quality, and
as for empirical data profit in Q2 is actually lower then Q1.

conclusion: Dont upgrade. Economically its not worth it and your
workers will lose more wellness and you will need to spend money on

Hope i helped.
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gjuro

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