Quantitative Analysis 3-19 - Respond based on EMV criteria - Must be in Excel fo
ID: 3758633 • Letter: Q
Question
Quantitative Analysis
3-19 - Respond based on EMV criteria - Must be in Excel format with formula within the cell (if a formula was used to calculate)
The lubricant is an expensive oil newletter to which many oil giants subscribe, including Ken Brown (see problem 3-17 for details which I have just posted, I will put the graph below) In the last issue the letter described how the demand for oil products would be extremly high. Apparently the American consumer will continue to use these oil products even if these products double, Indeed one of the articles in Lubricant states the chances of a favorable market for oil products was 70% while the chance of unfavorable market is 30%. Ken would like to use these probabilities in determining the best decision.
(a) What decision model should he use?
(b) What is the optimal decision?
Equipment Favorable Market Unfavorable Market
Sub 100 300,000 -200,000
Oiler J 250,000 -100,000
Texan 75,000 -18,000
Explanation / Answer
Solution :
a) Rational decision making model is used.
b) The decision is to make the price according to the normal people can use. As if the price gets double then americans can afford but normal people cannot afford.