Each year 9.2 million containers are shipped to the US with consumer goods and products from all over the world. There is concern that terrorists may obtain nuclear material from Russia, Pakistan, or North Korea and attempt to smuggle it into the US in one of these containers. Such material could be used to make a dirty bomb. Radiation detectors can be installed at ports to detect radiation leaking from a container. DHS wants to determine whether screening for nuclear materials on incoming containers is worthwhile. The main decision is whether to screen each container or not. If the detector’s radiation alarm goes off or not, then the decision must be made whether there is sufficient cause to physically inspect the container by opening it and scanning all contents with a Geiger counter. The cost of installing such equipment at all ports is estimated to be $6 per container screened. The cost of a physical inspection is estimated to be $600 per container inspected. If nuclear material is found, specialists must be flown in to secure and dispose of the material, at a cost of $100,000. If the material is not found and it is used in a dirty bomb, the estimated economic impact of such a disaster is $40,000,000,000. The probability that nuclear material is being smuggled in any given container is estimated to be 5x10^-9. There is an 80% chance that the alarm will sound if a container that contains nuclear material goes through the scanner, but there is also a 2.5% chance that the alarm will sound even if there is no nuclear material in the container. There is a 50% chance that nuclear material will be found during a physical inspection if there is some in the container. There is a 50% chance of an attack if the terrorist manages to successfully smuggle the material through the port.

a. Use an influence diagram to depict this decision situation.

b. Build the decision tree.

c. Perform the necessary probability calculations to find the probabilities in your decision tree.

d. Obtain risk profiles for each alternative. Do you think EMV is the best criterion to use here?

e. Is screening containers a good choice?