186 Decision Analysis PCS, VIA, S,)= $500 VIA. S,)= $500 V(B, 8,)= $2500 2 Utility function lg) 500 ‘$9000 Figure 4.29 Determine the P(S,] and P[S,] for each gamble A. B.C, and D, (©) Use EMV to determine the best gamble. (@ Use the utility fonction and decision analysis to determine the best gamble. (©) From part d, rank the gambles in order from the highest risk aversion to the least Problem 3 wo pamping systems supplying 10 Mgal/day as shown in Figure 4.30 are proposed. I'the system {ails it's anticipated that the area recciving this water will suffer a $SOM annual loss. PEF] = PLpurnp failure] = 003. All failure events are assumed to be independent eventsDecision Making Under Uncertainty 187 ital cost = $30M 1 Pump 2 isa backup cost = $10M —O-9—- No system backup Figure 4.30 (a), Define the states of nature S, and S; for plans A and B. (©) Determine the probabilities of $, and S, for plans A and B (©) Determine the present worth of losses including eapital costs V(A, S,), (A, $3), V(B,S,), and V(B, S,). Assume a design lif of 15 years and an annual interest rate of 5 percent. (2) Use decision analysis to determine the least-cost alternative. Problem 4 ‘Two mountain-top locations, sites A and B, have been selected forthe possible installation of wis turbines to generate electricity to be sold at $0.05 kW--hr. A loan for wind turbines may be secured at an annual interest rate of 15 percent. The design life is 8 years. Wind speed data have been collected and analyzed and are presented in the form of frequency distributions in Figure 431. The two turbines will operate between 10 and 40 miles/hr, Below 10 miles/h, there is insufficient wind to generate power, and above 40 miles/hr the machine is shut down to avoid wind damage. (@) Estimate the percentage of time the turbines will be operating at each site. (©) Estimate the number of hours per year the turbines will be operating at each site (© Determine the percentage of time the turbines will be shut down because of high winds, that is, wind speeds greater than 40 miles/he. (@) Owing to the high percentage of time the turbine at site Bis exposed to high winds, a more rugged machine will be installed there. The turbine at site B costs $40,000 and has a rated ‘output of 40 kW. The turbine at site A has a cost of $50,000 and a rated output of $0 kW. ‘The operation and maintenance costs are estimated at 2 percent of the capital cost at site ‘Aaand 5 percent a site B, Estimate the annual revenue for operating the turbines at each si (©) Use decision analysis to determine the best alternative, Do not forget the do-nothing alter- native.Problem $ ‘Two dams are being considered for construction. A. S4M construction cost. B._ S6M construction cost. For a serious flood itis assumed that there isa 10 percent chance the dam A will fail causing S1OM in damages and a $ percent chance that dam B will fail causing S1SM in damages. If major flood occurs, it is assumed that there is-a 15 percent chance dam A will fail, causing SISM in «damages, and there is an 8 percent chance that dam B will fai, causing $17M in damages. The probabilities of serious and major floods are estimated to be $ percent and | percent, respectively. ‘The design life ofthe project is 40 years, and the social opportunity-cost interest rate is 8 percent. (a) Drawa decision tree and label it appropriately. (b) Determine the better alternative to minimize losses. Hint: Let PCF] = Pfserious flood occurs in a 1-year period] = 005 PEF d = Plmajor flood occurs ina 1-year period] = 001 PLDam A fails|Fx) = PEF4IFel = 0.1 IF] = PEF Fa = 005 P{Dam A fails|Fy) = PLF,IF yd = 0.15 PLDam B fails|Fyd = PEFy|Fsd = 0.08 Problem 6 A town is currently being served by a water-pumping system supplying water at a rate of 10 Mgaliday. Population growth projections show that the town will require 20 Mgal/day. (See Figure 432.) The consequences of not delivering 20 Mgal/day are estimated to bean annual lossof: 250M. if Q = 0 Mgal/day 525M. ifQ = 10 Mgal/day SOM. if@ = 20 Meal/day Pump house 3 will be constructed to bring the total supply to a jninimum of 20 Mgal/day. Two alternatives are considered. A. Build a water-pumping system supplying 10 Mgal/day at S4M. B. Build a water-pumping system supplying 20 Mgal/day at S7M. For plan A, the new and old systems can deliver a total of 20 Mgal/day. For plan B, the new and ‘old systems can deliver a total of 30 Mgal/day. Plan B offers an oversupply and security against failure of the old system. The likelihoods of failure are PEF.) = PEF 3] = 002 PUFs] = 001190 Decision Analysis [Jeume house 1 [Jour houses Proposed water Existing water : "3 pumping system pumping system Town Figure 4.32 where Fy = F; = {failure of pumps in houses | and 2), respectively, and Fy = {failure of pumps in house 3.) The same probability of failure is assumed for the new system whether it delivers 10 or 20 Mgal/day. The design life ofthe project is 40 years, and the annual interest rate is 5 percent. (@) Determine the probability of the states of nature where Q, the flow, Q = {9:4 = 0, 10, 20) for plans A and B operating in parallel with the old system. (b) Draw a decision tree and label all consequences and states of nature probabil (©) Utilize decision theory to determine the better alternative system. * Problem 7 ‘A contractor has the opportunity to bid on supplying sand and gravel for a construction job. The volume of available material in the borrow pit is not known. Assume that the borrow pit is a rectangular solid as shown in Figure 4.33. The contractor, however, estimates that there is a ‘uniform probability that the depth of the borrow is between 10 and 20. Px) = Hy for 10s x <20 ‘The contractor plans to make one of the following bids [AL Bid on supplying 400 yd? of material B. Bid on supplying 600 yd? of materia.Project Planning 199 ‘The conditional probability is PTS; |Z 024] = Remarks Even though the two trafficcountersgiveinconsistent readings, heres valucin usingtwo recorders instead of one. From parts a and b, the probabilities are PES ,1Z,) PIS IZ Z,) One traffic recorder undercounted: therefore, more weight is placed upon the higher count. If both recorders give the same reading of | vehiele, the probability increases slightly. 867 1958 PLS, 12,024) The PLS; |Z, -Z,] isnot equal to 1, because there is a chance that both recorders undercounted. fon the same event. The traffic recorder will never overcount, but there is always the chance it will undercount. These results show the advantage of repeat experiments, 1979 PROBLEMS Problem 1 ‘The seismic test isan imperfect test witha sample likelihood of: PIS) 5, 8: Z, 060 0.30 Z, 030 0.70 Z 010 0.00 Where Z) = {test outcome 1, 2,3} and S, = {true state of nature, {32} (a) Ate the probabilities P(Z,1S,1, P[Z21S;], and P{Z,|S,] mutually exclusive or independent random events? (b)_ Given S,, what isthe probability thatthe seismic testis either Z, or Z,? (©) Determine the marginal probability of Z, given thatthe subjective probabilities of S, and S, are equal to 0.25 and 0.75, respectively. Problem 2 Show that for perfect testing the posterior probability function is: 10 fori =j rsiea={o er200 Decision Anal Problem 3 ‘chemical test used in the environmental laboratory has been calibrated. The sample likelihood is a dna PIZIS) 5 By ss ee Z, 090 015 o10 Z, 0.10 - 070 0.30 Z 000 015 0.60 ee Ss. Ss.Ss = (low, medium, and high concentration levels of samples, espectivly,} 21-Z3. 2s = (low, medium, and high concentration tet readings, espectively.) (@) There isan equaly likely chance thatthe tue state of nature is S,, 8, oF Sy Assign sub- Jective probabilities to these states. Problem 4 Rete problem description and sample likelihoods of Example 45 to answer this question. The soil borings at the locations marked + are as follows: LOCATION DEPTH, d, 1 45 ft 2 42tt a 35 ft (@) Calculate the probability thatthe depth at pile location A to bedrock is 40 for less, siven the above boring test results a @)_ Determine the probability thatthe depth to bedrock at pile location B is 40 Nor es. (© Determine the probability thatthe depth to bedrock at pile location Cis 40 to tos (©) Prepare a table comparing the probabilities thatthe depth to bedrock is 40 or las forall pile locations A through H. Problem 5 {az the problem description and sample likelihoods given in Example 4.6 to answer this question, Assume P[So] = PIS,] = P[S,] = PIS,] = 025 ) Given that no vehicles are recorded by the traffic counter, determine the probabilities that the true number of vehicles is 0, 1,2, and 3, (© Assume two trafic counters are used, One recorder records 0, and the other one records 2 Determine the probabilities that 0, 1,2, and 3 are the true state of nature