Question
You are the mechanical engineer in charge of maintaining the machines in a factory. The plant manager has asked you to evaluate a proposal to
You are the mechanical engineer in charge of maintaining the machines in a factory. The plant manager has asked you to evaluate a proposal to replace the current machines with new ones. The old and new machines perform substantially the same jobs, and so the question is whether the new machines are more reliable than the old. You know from past experience that the old machines break down roughly according to a Poisson distribution, with the expected number of breakdowns at 2.5 per month. When one breaks down, $1,500 is required to fix it. The new
machines, however, have you a bit confused. According to the distributor's brochure, the new machines are supposed to break down at a rate of 1.5 machines per month on average and should cost $1,700 to fix. But a
friend in another plant that uses the new machines reports that they break down at a rate of approximately 3.0 per month (and do cost $1,700 to fix). (In either event, the number of breakdowns in any month appears to
follow a Poisson distribution.) On the basis of this information, you judge that it is equally likely that the rate is 3.0 or 1.5 per month. Now you learn that a third plant in a nearby town has been using these machines. They have experienced 6 breakdowns in 3.0 months. Use this information to find the posterior probability that the breakdown rate is 1.5 per month.
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