Which many oil giants subscribe including ken brown

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Reference no: EM132219106

The course is Quantitive Research Methods and the book is Quantitive Analysis for Management (12 ed.) (Render, Stair, Jr., Hanna, & Hale, 2015). Boston, MA: Pearson.

Problem 3-19. The Lubricant is an expensive oil newsletter to which many oil giants subscribe, including Ken Brown (see equipment/market values below for details). In the last issue, the letter described how the demand for oil products would be extremely high. Apparently, the American consumer will continue to use oil products even if the price of these products doubles. Indeed, one of the articles in the Lubricant states that the chances of a favorable market for oil products was 70%, while the chance of an unfavorable market was only 30%. Ken would like to use these probabilities in determining the best decision.

Equipment Favorable Market Unfavorable Market

Sub 100 $300,000 -$200,000

Oiler J $250,000 -$100,000

Texan $75,000 -$18,000

(a) What decision model should be used?

(b) What is the optimal decision?

(c) Ken believes that the $300,000 figure for the Sub 100 with a favorable market is too high. How much lower would this figure have to be for Ken to change his decision made in part b?

Reference no: EM132219106

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