Let's suppose you are an oil company and your odds of finding oil in a nearby oil field is only 20 - 30%. Many
time's oil companies will use decision tree analysis of a win/lose relationship and as they move outwards using decision trees using tests, improve their odds substantially even up to a 50 - 60% chance of finding oil. However, many of those tests can be costly. What is the advantage of using one or two tests for an oil company digging for oil to uses tests and reduce its risk? Also, how does the test costs play an important role whether or not to spend money on the tests or continue drilling with the old percentages of 20 - 30% in their original drilling forecast?
The benefit of using one or two tests to check for oil is beneficial since it changes the probability of finding oil. The... View the full answer