A Contractor Builds Large Ships for the Department of Defence

question 63

Essay

A contractor builds large ships for the Department of Defence. A recent contract called for 12 amphibious landing platforms. It was originally estimated that the first of these would cost $1 billion and that 80% learning would be appropriate. In fact, the first ship cost $1.6 billion and the second $1.12 billion. What is the revised learning rate? What will be the total cost of the twelve ships? Is it higher or lower than the original estimates? If the defence department cuts the contract from 12 ships to 9, what happens to the average cost per ship?

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Definitions:

Social Dilemma

A situation in which individual self-interest conflicts with collective interest, leading to challenges in cooperative behavior and optimal societal outcomes.

Uncertainty Threat

The feeling of discomfort or stress caused by not knowing or by having doubts about outcomes or intentions.

Uncertainty-Identity Theory

A theory that posits individuals join and strongly identify with groups to reduce uncertainty about themselves and the world.

Ambiguity

The presence of uncertainty or lack of clarity in information, meaning, or instructions.