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A County is considering whether to build a levee along the river bank as a flood control system. The two alternative solutions are:
1 A 5foot high levee costing $ 10000000, and
2 a 10foot high levee costing $25000000
Both levees would have a useful life of 100 years. Historical records indicates that there is a 10% chance that the river will rise between 2 ft and 10ft, and a 2% chance that it will rise over 10ft. Any flood caused by river rising more than 2 ft in the absence of a levee or overflowing the levee is estimated to cause $ 200000000 in property damage.
A Which option has the least expected cost? Note: having no levee is also for consideration.
B Property damage in monetary term is not the only criterion for decision making. Suppose this county could consider the utility of property damage as a function of the payoff cost as indicated in the equation below , what should its decision be ?
Utility function: U=1 (1/50625)*Xˆ2
Where X is the pay – off cost to the County.
 one year ago
 one year ago
A County is considering whether to build a levee along the river bank as a flood control system. The two alternative solutions are: 1 A 5foot high levee costing $ 10000000, and 2 a 10foot high levee costing $25000000 Both levees would have a useful life of 100 years. Historical records indicates that there is a 10% chance that the river will rise between 2 ft and 10ft, and a 2% chance that it will rise over 10ft. Any flood caused by river rising more than 2 ft in the absence of a levee or overflowing the levee is estimated to cause $ 200000000 in property damage. A Which option has the least expected cost? Note: having no levee is also for consideration. B Property damage in monetary term is not the only criterion for decision making. Suppose this county could consider the utility of property damage as a function of the payoff cost as indicated in the equation below , what should its decision be ? Utility function: U=1 (1/50625)*Xˆ2 Where X is the pay – off cost to the County.
 one year ago
 one year ago

This Question is Closed

fa272Best ResponseYou've already chosen the best response.0
Can anyone help me to draw the decision tree?
 one year ago
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