The X-Ray scanner at PlanesMustFall airport occasionally require repair. If the

ID: 3040368 • Letter: T

Question

The X-Ray scanner at PlanesMustFall airport occasionally require repair. If the scanners are not serviced regularly, there is a 10% chance that they would require major repair during the year at a cost of Rl0,000 and there is a 40% chance that they would require minor repair during the year at a cost of Rl,000. A quarterly service plan is available at a cost of R800 per year. On this plan (where the scanners are serviced every 3 months), there is only a 5% chance that the scanners would require major repair during the year at a cost of R9000 and there is a 25% chance that they would require minor repair during the year at a cost of R900.

a) Provide a payoff table to represent the problem. Include all states of nature and all alternatives/acts.

Explanation / Answer

There are four actions available to PlanesMustFall airport. They have to decide which of the actions is the best one under each criteria.

PlanesMustFall airport have control over which action they choose.

There are three possible states of nature. A state of nature is an outcome.

The Payoff table is,

Do not take the Service Plan

Take the Service Plan

Major Repair

Rl0,000

(Probability = 0.1)

R9000

(Probability = 0.05)

Minor Repair

Rl,000

(Probability = 0.4)

R900

(Probability = 0.25)

(Probability = 0.5)

(Probability = 0.7)

Action State of Nature