The Lubricant is an expensive oil newsletter to which many oil giants subscribe,

ID: 3300474 • Letter: T

Question

The Lubricant is an expensive oil newsletter to

which many oil giants subscribe, including Ken

Brown (see Problem 3-17 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.

a) What decision environment should be used? (Certainty, uncertainty, Risk)

b) What is your decision?

c) How muhc lower would this figure have to be for Ken to cahnge his decison made in b?

a, Here,certainity environment is used.

b, Oil products demand would be extremely high irrespective of its price.

c,this figure has to be lower by 30% for ken to Change his decision made in b.

Please give a THUMBS UP!!!

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