The Lubricant is the expensive oil newsletter to which several oil giants subscribe, comprising Ken Brown. In last issue, letter described how demand for oil products would be very high. American consumer will continue to utilize oil products even if price of the products doubles. Indeed, one of articles in Lubricant states that chances of the favourable market for oil products was 70%, while chance of the unfavourable market was only 30%. Ken would like to use the probabilities in finding best decision.
i) What decision model must be used?
ii) Find optimal decision?
iii) Ken thinks that $300,000 figure for Sub 100 with the favourable market is too high. How much lower would figure have to be for Ken to change the decision made in part (b)?