Tugas Personal ke-3

Minggu 08 / Session 09

Nama : Dhadung Prihananto

NIM : 2140071352

The PT Geo Teknika (GT) owns a tract of land that may contain oil. A consulting geologist
has reported to management that he believes there is oil with probability of 0.2. Because of
this prospect, another oil company has offered to purchase the land for $120,000. However,
PT GT is considering holding the land in order to drill for oil itself. The cost of drilling is
$150,000. If oil is found, the resulting expected revenue will be $1,050,000, so the
company’s expected profit (after deducting the cost of drilling) will be $900,000. A loss of
$150,000 (the drilling cost) will be incurred if the land is dry (no oil).
Table 1 summarizes these data. Determine the decision of whether to drill or sell based just
on these data.

Table1: Prospective profits for the PT Geo Teknika (GT).

Status of Land Payoff

Alternative Oil Dry

Drill for oil $ 900,000 -$150,000

Sell the land $ 120,000 $ 120,000

Probability of status 0.2 0.8

ISYE9001 - Engineering Optimization

Decision Making Without Experimentation

Maximum Payoff Criterion

         
State of Nature
Alternative
Oil Dry Minimum
Drill for oil 900 -150 -150
Sell the land 120 120 120 maximin value
Prior Probability 0.2 0.8      
Application of the maximin payoff criterion

           
  State of Nature
Alternative Oil Dry
Drill for oil 900 -150 -150
Sell the land 120 120 120 maximum in this column

Prior Probability 0.2 0.8

 
    Maximum      
Application of the maximum payoff criterion

Bayes Decission Rule

E[Payoff (Drill)]= 0.2(900) + 0.8(-150)

= 60
E[Payoff (Sell)] = 0.2(120) + 0.8(120)
= 120
Payoff Sell > Payoff Drill, the alternative selected is to sell the land

ISYE9001 - Engineering Optimization