Carter Racing Decision Write Up - Carter Racing Decision When making any decision one must weigh the pros and cons Although a decision may seem great at

Carter Racing Decision Write Up - Carter Racing Decision...

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Unformatted text preview: Carter Racing Decision When making any decision, one must weigh the pros and cons. Although a decision may seem great at first glance, a careful analysis of the decision may lead to a different opinion. One may identify new risks that were not seen before or he may realize that a risk that seems too dangerous is actually an acceptable risk. In the Carter Racing dilemma, the Carter brothers need to decide if the risk of racing is too dangerous or an acceptable risk. They call for advice from different sources to help analyze the problem at hand. After reviewing the case, I believe the two should race in the Pocono race. To begin with, the benefits from winning the race outweigh the potential risks in a Cost Benefit Analysis. If the Carters win, they will gain a Goodstone Tires sponsorship. This opportunity puts Carter Racing at the top of the league. They will also receive a much-­‐ needed $40,000. If they come in the top five of this race, they have the opportunity to gain a full season sponsorship from Goodstone. A Goodstone Tire sponsorship would be worth $1,000,000 plus incentives. They could also afford a new car with this money. Besides having a sponsor, Carter Racing would begin to make profits, which they haven’t done before. They would also only race in major events, which is a great benefit and dream of racecar teams. Clearly this is an offer the brothers should not risk loosing. If they decide not to race they will end up losing $50,000. Over half of their races they have completed which makes finishing the race and having the sponsorship more likely. They also almost always finish in the top five, which makes a full year sponsorship very likely. Downsides to racing and having problems include wasting money on the entrance fee and replacing the car’s engine. Neither of these 2 risks compare to the benefits of running a successful race. Furthermore, after analyzing the races and probabilities, it shows Carter Racing usually does not have issues during races. Out of 24 races they competed in, the brothers finished 15 successfully. This mean Carter Racing finishes 53.5% of all races. Therefore Carter Racing has a 53.5% chance of a successfully having Goodstone sponsorship. Of the 15 completed races, the brothers came in the top five 12 times. This represents an 80% chance the brothers receive a full year Goodstone sponsorship. The chances are in the Carter brothers’ favor and they should race. A decision tree could also be used to show the expected value of having a successful outcome, dependent on the value of nonmonetary items, such as a sponsorship and racing in only exclusive events. Since it is hard for laypersons to monetize those values, the brothers will have a hard time seeing for themselves why they should race. Finally, the problem of why the brothers don’t finish races is unclear. Since the brothers have too great of an emotional investment in the race, they should consult outsiders for advice. Paul believes it is due to the air temperature, while Tom believes it is the underlying luck of racing. Tom’s data makes it believable that air temperature is not the issue. He is an expert in the field, who has been racing for 20 years, and understands the importance of using statics to make decisions, unlike a layperson such as Paul. Paul does not have the complete engineering background that most involved with racing do. Although he seems knowledgeable, his opinion may not be as reliable as someone who understands the unpredictable factor of racing. Tom states, “You are pushing the limits of what is known.” When deciding between which opinion to trust, an expert like Tom is more reliable than a layperson like Tom. Therefore, the brothers should race. ...
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  • Spring '14
  • HowardKunreuther
  • Carter  Racing

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