As noted in the text, top management of BP adopted a lax approach to safety in its
Question:
a. If a disaster were to occur, the best estimate of the ultimate cost to BP is $10 billion. This expected-value estimate considers a range of costs—from the tens of millions if an oil spill is immediately plugged by emergency measures to as high as $40 billion (BP’s estimated cost of the 2010 spill) in the worst-case scenario. Of the three operating options, which is most profitable? Equivalently, which has the lowest net expected cost?
b. How would BP’s operating choice change if, because of wishful thinking, it (wrongly) believed that its lenient safety policy implied only a 2 percent disaster risk? Or if it believed that its expected disaster cost would be $5 billion (instead of $10 billion)?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Managerial economics
ISBN: 978-1118041581
7th edition
Authors: william f. samuelson stephen g. marks
Question Posted: