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    TP3-W8-S9-R0 (Dhadung P)

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    Dhadung Prihananto
    The document summarizes a decision problem faced by an oil company, PT Geo Teknika. They own a tract of land that may contain oil, with a 20% probability of containing oil based on a geologist's assessment. Another oil company has offered to purchase the land for $120,000. Alternatively, PT GT could drill for oil themselves at a cost of $150,000, with an expected revenue of $1,050,000 if oil is found. The expected payoff of drilling or selling is calculated based on the probabilities and outcomes. Using the Bayes decision rule, the expected payoff of selling the land is $120,000, higher than the expected payoff of drilling of $60,

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    TP3-W8-S9-R0 (Dhadung P)

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    Dhadung Prihananto
    77 views2 pages
    The document summarizes a decision problem faced by an oil company, PT Geo Teknika. They own a tract of land that may contain oil, with a 20% probability of containing oil based on a geologist's assessment. Another oil company has offered to purchase the land for $120,000. Alternatively, PT GT could drill for oil themselves at a cost of $150,000, with an expected revenue of $1,050,000 if oil is found. The expected payoff of drilling or selling is calculated based on the probabilities and outcomes. Using the Bayes decision rule, the expected payoff of selling the land is $120,000, higher than the expected payoff of drilling of $60,

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    The document summarizes a decision problem faced by an oil company, PT Geo Teknika. They own a tract of land that may contain oil, with a 20% probability of containing oil based on a geologist's assessment. Another oil company has offered to purchase the land for $120,000. Alternatively, PT GT could drill for oil themselves at a cost of $150,000, with an expected revenue of $1,050,000 if oil is found. The expected payoff of drilling or selling is calculated based on the probabilities and outcomes. Using the Bayes decision rule, the expected payoff of selling the land is $120,000, higher than the expected payoff of drilling of $60,

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    77 views2 pages

    TP3-W8-S9-R0 (Dhadung P)

    Uploaded by

    Dhadung Prihananto
    The document summarizes a decision problem faced by an oil company, PT Geo Teknika. They own a tract of land that may contain oil, with a 20% probability of containing oil based on a geologist's assessment. Another oil company has offered to purchase the land for $120,000. Alternatively, PT GT could drill for oil themselves at a cost of $150,000, with an expected revenue of $1,050,000 if oil is found. The expected payoff of drilling or selling is calculated based on the probabilities and outcomes. Using the Bayes decision rule, the expected payoff of selling the land is $120,000, higher than the expected payoff of drilling of $60,

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    Tugas Personal ke-3

    Minggu 08 / Session 09

    Nama : Dhadung Prihananto

    NIM : 2140071352

    The PT Geo Teknika (GT) owns a tract of land that may contain oil. A consulting geologist
    has reported to management that he believes there is oil with probability of 0.2. Because of
    this prospect, another oil company has offered to purchase the land for $120,000. However,
    PT GT is considering holding the land in order to drill for oil itself. The cost of drilling is
    $150,000. If oil is found, the resulting expected revenue will be $1,050,000, so the
    company’s expected profit (after deducting the cost of drilling) will be $900,000. A loss of
    $150,000 (the drilling cost) will be incurred if the land is dry (no oil).
    Table 1 summarizes these data. Determine the decision of whether to drill or sell based just
    on these data.

    Table1: Prospective profits for the PT Geo Teknika (GT).

    Status of Land Payoff

    Alternative Oil Dry

    Drill for oil $ 900,000 -$150,000

    Sell the land $ 120,000 $ 120,000

    Probability of status 0.2 0.8

    ISYE9001 - Engineering Optimization


    Decision Making Without Experimentation

    Maximum Payoff Criterion


             
    State of Nature
    Alternative
    Oil Dry Minimum
    Drill for oil 900 -150 -150
    Sell the land 120 120 120 maximin value
    Prior Probability 0.2 0.8      
    Application of the maximin payoff criterion

               
      State of Nature
    Alternative Oil Dry
    Drill for oil 900 -150 -150
    Sell the land 120 120 120 maximum in this column

    Prior Probability 0.2 0.8


     
        Maximum      
    Application of the maximum payoff criterion

    Bayes Decission Rule

    E[Payoff (Drill)]= 0.2(900) + 0.8(-150)


    = 60
    E[Payoff (Sell)] = 0.2(120) + 0.8(120)
    = 120
    Payoff Sell > Payoff Drill, the alternative selected is to sell the land

    ISYE9001 - Engineering Optimization

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