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Bayes Theorem Example and
Choosing By Advantages
Kristen Parrish
CE167 Spring 2010
Lecture 16

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Bayes Theorem Example
You are the owner of a construction company that was
recently hired to build the world’s first mile-high
building. While looking at the drawings for the building,
you determine that the construction sequence may not
lead to a stable structure. You estimate that the
probability that the structure is stable is 80%. You bring
this to the attention of the owner, who suggests that
you build a mockup. The mockup will be stable if the
structure is stable 95% of the time, and unstable if the
structure is unstable 99% of the time. If the benefit
from a stable structure is $200,000 and the cost of an
unstable structure is $400,000, how much should the
owner be willing to pay for a mockup?