Question
Risk and uncertainty are often used interchangeably in everydaydiscussions, but they are different, in business, two different concepts.Risk describes a situation in which we do
Risk and uncertainty are often used interchangeably in everydaydiscussions, but they are different, in business, two different concepts.Risk describes a situation in which we do not know the outcome, but we do know all the possible outcomes and can assign probabilities to each of these outcomes happening.Risked can be managed.Knowing the potential costs of errors, allows managers to hedge and/and or insure against costly outcomes.For example, ever since you quarterback had shoulder surgery, he only connects with thereceiver one out of every four passes.You know that your kicker can score 80% of the time when your team is within 25 yards ofthe goal.You can make the calculation.Every time you are within 25years of the goal, an attempted pass will get .25*6 points or the point payoff is 1.5 points. Versus the point payoff for a kick is .80*3or the point payoff is 2.4 points. You can make a plan for the game.
Government support for the development ofCovid-19 vaccines took two different forms.Some firms accepted grants (a.k.a, direct monetary support) for vaccine development and testing.As a condition of the grant, the government has options to purchase a first and specific number of vaccine doses.Other firms chose not to accept grants.Instead they negotiated advanced-purchase agreementto supportpre-approval manufacturing of vaccines.The purchase agreement stipulates that payment will be made upon delivery of thepre-specified number of doses.
1.Is the successful development and delivery of a vaccine forCovid-19 virus risky or an uncertainty?
2.In the case of direct support agreements, who bears the cost of failure?
3.In the case of advanced purchase agreements, who bears the cost of a failure?
4.Pfizer was the first firm to have its vaccine authorized for use in the U.S.It did not accept a grant to support development and testing, but the Pfizer did negotiate an advance-purchase agreement for $1.95 billion to support the manufacturing of 100 million doses.Looking back, what hiddeninformation is revealed by Pfizer's deal?
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