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Testo171121 EN

This document contains three exercises related to decision analysis: 1. Build an influence diagram to model a production decision involving replacing a pressure switch or sending a machine for service after a failure. The decision depends on the results of a pressure test. 2. Build a decision tree to model buying an optional lifetime warranty for a new manipulator, which may require service. The decision depends on warranty and service costs. 3. Analyze two gambling games, choosing the preferred game based on risk attitude and utility functions.

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37 views

Testo171121 EN

This document contains three exercises related to decision analysis: 1. Build an influence diagram to model a production decision involving replacing a pressure switch or sending a machine for service after a failure. The decision depends on the results of a pressure test. 2. Build a decision tree to model buying an optional lifetime warranty for a new manipulator, which may require service. The decision depends on warranty and service costs. 3. Analyze two gambling games, choosing the preferred game based on risk attitude and utility functions.

Uploaded by

shah4190
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Traccia A

Corso di Analisi delle Decisioni


Midterm exam - 21.11.2017

Exercise 1. The High Performance Architectures, a manufacturer of high-performance computers,


has stopped the production due to a failure of the assembly machine. In these machines, the most
common cause of failures is a malfunction of the pressure switch. If the pressure inside the
pneumatic circuit exceeds 2 bar (event that occurs with probability 0.05), the pressure switch fails
with probability 0.9. Conversely, for regular pressure values (less than 2 bar), the probability of a
failure of the pressure switch is 0.3. A new pressure switch is already available for replacement (it
takes one day to replace the switch). In this case, if the failure is really due to the pressure switch,
the production can be resumed after one day. If a different component caused the failure, the
machine must be sent out for service. In this case, the production can be resumed after either three
days (with probability 0.6) or four days (with probability 0.4), i.e., the time it takes to receive
a replacement machine (irrespective of the cause of the failure). The head of the Production
Department must choose one between the following alternatives: i) replace the pressure switch,
and, in case it is not the cause of the failure, the next day send out the machine for service; ii)
send out the machine for service. Assume that one day of suspended production costs 10 ke.
Before making the decision, a test is performed to understand if the pressure inside the pneumatic
circuit has exceeded the 2 bar limit. If this really occurred, the test will return a positive result
with probability 0.7. However, there is a 0.2 probability of getting a false positive (i.e., the test
returns a positive result although the pressure did not really exceed the limit).

a) Build an influence diagram modeling the decision problem at hand. Include all the necessary
tables, clearly defining the meaning of all the nodes, alternatives and results.

Exercise 2. You have bought a new industrial manipulator. It comes with a 1-year warranty
(1YW) that covers any possible failure. You have the opportunity to buy a lifetime warranty
(LTW) that costs 10 ke. If you do not buy the LTW now, you can decide whether or not to
buy the LTW after the 1YW has expired. In this case, however, the LTW will cost you 15 ke.
From your past experience, 80% of industrial manipulators need one service intervention during
the first year (at no expense, covered by the 1YW). Among these ones, 60% need an additional
intervention in the rest of their lifetime (40% do not need additional interventions). Conversely,
among the manipulators not requiring service during the first year (20% of the total), only 10%
need one service intervention later on (90% never need service). Assume a fixed cost of 30 ke per
service intervention not covered by warranty.

a) Build a decision tree modeling the decision problem at hand.

b) Find the strategy maximizing the expected monetary value (EMV) and compute the asso-
ciated EMV.

c) Denote by C the cost of buying the LTW now and assume that one year later (when the
1YW expires) the LTW will cost you 1.5C. Compute the maximum value of C that makes
buying the LTW now preferable.

d) Let C = 10 ke. Suppose there is a way to know in advance (i.e., now) and for sure whether
or not the manipulator will need one service intervention after the first year. How much
would you pay for this information.

Exercise 3. You have to choose which game to play between the following ones.

1
Game A. A ball is drawn at random from a bowl containing two red balls and two black balls.
If the drawn ball is red, you win 100 e. Otherwise, you lose 100 e.

Game B. A ball is drawn at random from a bowl containing two red balls and two black balls.
After looking at the color of the drawn ball, you have two choose between the following
alternatives: i) you terminate the game by paying 35 e; ii) you draw another ball (without
replacement) from the bowl. In the latter case, if the drawn ball is red, you win 100 e.
Otherwise, you lose 100 e.

a) Assume you are risk neutral. Which game do you prefer?

b) Assume your utility function is


 x 
U (x) = ln 1 + .
200
Which game do you prefer? What is your risk attitude?

c) Assume your utility function is the same as in point b). Compute the certainty equivalent
of Game B. Briefly illustrate the meaning of the obtained result.

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