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The BigGreasy is an expensive oil newsletter to which many oil giants subscribe, including James Slick.

The BigGreasy is an expensive oil newsletter to which many oil giants subscribe, including James Slick. 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 BigGreasy states that the best decision can often be determined by using the five criteria for making decisions under uncertain. Determine the best alternative for each of the 5 criteria. (You should have 5 results.)

 

Equipment

Favorable Market ($)

Unfavorable Market ($)

Texaco

$240,000

-$43,000

BP

$375,000

-$39,000

Shell

$175,000

 $18,000

 

  1. What decision model should James use?
  2. What is the optimal decision?
  3. How much should James be willing to pay for perfect information?

Top Answer

The best decision model in this case is the decision tree. If the probability of each of the node is known... View the full answer

decision tree23.png

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