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Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations.
Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. During a meeting with your client, the CEO asks if your economic models include all factors that impact gasoline prices.
Part
What is your response to his question?
A
No since the economic convention is to limit inclusion to the top three variables.
B
No the model is a simplified representation of reality.
C
Yes the model includes every result from related academic papers and all industry expertise.
D
Yes the model includes all factors.
Part
Your client becomes critical of your "sloppy" technique of using a model that does not include all factors.
What is the most appropriate reply to this criticism?
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