Reconsider the Goferbroke Co. case study when using utilities, as presented in Section 9.9.

a. Beginning with the decision tree shown in Figure 9.23 (Available in one of this chapter's Excel files), prepare to perform sensitivity analysis by expanding and organizing the spreadsheet to (1) consolidate the data and results in one section and (2) incorporate the Excel template for posterior probabilities in another section (similar to what was done in Figure 9.18 ).

FIGURE 9.23

b.

Perform sensitivity analysis by re-solving the decision tree (after using the Excel template for posterior probabilities to revise these probabilities) when the prior probability of oil is changed in turn to 0.15, 0.2, 0.3, and 0.35.

FIGURE 9.18: In preparation for performing sensitivity analysis on the full Goferbroke Co. problem, the data and results have been consolidated on the spreadsheet to the right of the decision tree.

Transcribed Image Text:

Decision Tree for Goferbroke Co. Problem (with Max's Utility Function) 14.3% Oil 0.97 Drill 0.97 0.97 0.139 85.7% Dry 70% Unfavorable 10 0.3 12 13 14 Sell 15 0.3 0.3 0.3 16 Do Survey 17 50% 18 0 0.356 19 Oil 20 0.97 0.97 0.97 21 Drill 22 23 0.485 50% 24 Dry 30% 25 Favorable 26 27 0 0.485 28 29 Sell 30 0.356 0.3 31 0.3 0.3 32 33 25% 34 Oil 35 36 Drill 37 0 0.2875 38 75% Dry 39 No Survey 40 0.05 41 0.05 0.05 42 0 0.333 43 44 Sell 45 0.333 46 0.333 0.333 ZIAA Decision Tree for Goferbroke Co. Problem (with Survey) 14.34 Data Cotof Sunay 30 670 Cost of Delling 100 Drill 800 670 Revenue if Ol 800 Revenue if Sel 90 Revenue if Dry Prior Probubility ofo -100 -15.714 85.7% 70% Dry 0.25 10 Uafavorble -130 PESSI OD 06 11 -130 PUSS I Dry 08 12 60 13 Action 15 60 De Survey Yes 16 60 17 Do Survey I No Yes 18 19 50% 30 123 Dell Dnill I Fivorable 20 670 Sel trUalavorble 21 Drill 800 670 22 23 24 25 26 27 -100 210 Dry Expected Payoff Sthoands) Forable .130 -130 123 28 29 Sell 30 123 Data Piading I Sute) 31 60 Sule of Price Finding USS 90 Peobubility FSS 0.6 32 Na 33 25% 025 0.4 34 Dry 075 0.2 35 200 36 Dril 800 700 37 38 100 100 75% 39 Dry Posterior PSate Finding) No Surwy Prubabiliin: 40 100 Sate of Natu 41 100 Finding Piading Dry 42 FSS 0.5 0.5 43 USS 07 G143 ORS7 44 Sell 45 90 46