Midterm Solutions

Midterm Solutions - MS&E 252 Decision Analysis I...

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MS&E 252 Midterm Solutions Decision Analysis I Nov 14 th , 2007 Page 1 of 12 Midterm Midterm Examination Solutions Grade Distribution
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MS&E 252 Midterm Solutions Decision Analysis I Nov 14 th , 2007 Page 2 of 12 Midterm Grade Distribution by Question
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MS&E 252 Midterm Solutions Decision Analysis I Nov 14 th , 2007 Page 3 of 12 Midterm 1. Answer: c) Answer a) is incorrect; PISPs deal with values in use, not values in exchange. Answer b) is also incorrect; the value of clairvoyance on an uncertainty is your PIBP for the clairvoyant’s services, and not your PISP for the information. Answer c) is correct. It is only if your PIBP for an item exceeds or is equal to its cost that you should purchase it. Finally, answer d) is incorrect: it is possible to be risk-averse and have a non-delta u- curve, such as a logarithmic or square-root u-curve. In that case, your PIBP and PISP for some uncertain deal do not have to be equal. 2. Answer: b) Statement I is false – You can never infer relevance from a relevance diagram. Statement II is true – In the present state of the diagram, A and B are both conditioned on & only, and there is no arrow going from one to the other. Therefore, A and B are irrelevant given &. Statement III is false – We need to perform the following operations: Add an arrow from A to B, in order to then flip the arrow from B to C. Flip the arrow from A to C, so that we can then flip the arrow from A to B. We are left with only one arrow to flip, namely the one that goes from A to D. But in order to flip it, we would need to add an arrow from B to D – therefore we cannot conclude that B and D are relevant or irrelevant given C and &. Statement IV is false – So that both A and B can be conditioned on C and &, we would need to flip the arrow which goes from B to C. Unfortunately, this would require that we add an arrow from A to B, thus making it impossible to conclude as to whether A and B are relevant or irrelevant given C and &. 3. Answer: a) The only information contained in Diagram I is that A and B are irrelevant given C and & (to see this, you can flip the arrow that goes from A to C). We can then notice that Diagram II contains the exact same information.
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Midterm Solutions - MS&E 252 Decision Analysis I...

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