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  • 4 years 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 5-foot high levee costing $ 10000000, and 2- a 10-foot 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 pay-off 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.

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  1. anonymous
    • 4 years ago
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    Can anyone help me to draw the decision tree?

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