The Lubricant is an expensive oil newsletter to which many oil giants subscribe, including Ken Brown (see Problemfor details). 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 Lubricant states that the chances of a favorable market for oil products was, while the chance of an unfavorable market was only Ken would like to use these probabilities in determining the best decision.
(a) What decision model should be used?
(b) What is the optimal decision?
(c) Ken believes that the figure for the Sub with a favorable market is too high. How much lower would this figure have to be for Ken to change his decision made in part (b)?