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[Solution] Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual

Question: Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by a factor of over 100. At the present time, Ken is forced to con- sider purchasing some more equipment for Brown Oil because of competition. His alternatives are shown in the following table:

States of Nature
Options Favorable Unfavorable
Sub 100 300,000 -200,000
Oiler J 250,000 -100,000
Texan 75,000 -18,000

For example if Ken purchases a Sub 100 and if there is a favorable market, he will realize a profit of $300,000. On the other hand, if the market is unfavorable, Ken will suffer a loss of $200,000. But Ken has always been a very optimistic decision maker.

  1. What type oi decision is Ken facing?
  2. What decision criterion should he use?
  3. What alternative is best?

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