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    Decision Tree Exercise - Bayes: The Machine Is Operating at Peak Efficiency?

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    Andi Chandra
    1. An engineer estimates a machine has a 75% chance of operating at peak efficiency. A report shows the machine exceeded 80°C, which has a 0.3 probability if efficient but 0.8 probability if not efficient. Given this information, the engineer should revise the probability of peak efficiency to 57.5%. 2. A sales manager estimates high sales at 0.2, medium at 0.7, and low at 0.1. A forecast predicts high sales. Given probabilities of the forecast accuracy, the manager should revise estimates to high sales at 0.36, medium at 0.56, and low at 0.08. 3. A retailer must decide between large or small stock for summer

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    Decision Tree Exercise - Bayes: The Machine Is Operating at Peak Efficiency?

    Uploaded by

    Andi Chandra
    238 views2 pages
    1. An engineer estimates a machine has a 75% chance of operating at peak efficiency. A report shows the machine exceeded 80°C, which has a 0.3 probability if efficient but 0.8 probability if not efficient. Given this information, the engineer should revise the probability of peak efficiency to 57.5%. 2. A sales manager estimates high sales at 0.2, medium at 0.7, and low at 0.1. A forecast predicts high sales. Given probabilities of the forecast accuracy, the manager should revise estimates to high sales at 0.36, medium at 0.56, and low at 0.08. 3. A retailer must decide between large or small stock for summer

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    DT Bayes Exercise

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    1. An engineer estimates a machine has a 75% chance of operating at peak efficiency. A report shows the machine exceeded 80°C, which has a 0.3 probability if efficient but 0.8 probability if not efficient. Given this information, the engineer should revise the probability of peak efficiency to 57.5%. 2. A sales manager estimates high sales at 0.2, medium at 0.7, and low at 0.1. A forecast predicts high sales. Given probabilities of the forecast accuracy, the manager should revise estimates to high sales at 0.36, medium at 0.56, and low at 0.08. 3. A retailer must decide between large or small stock for summer

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    238 views2 pages

    Decision Tree Exercise - Bayes: The Machine Is Operating at Peak Efficiency?

    Uploaded by

    Andi Chandra
    1. An engineer estimates a machine has a 75% chance of operating at peak efficiency. A report shows the machine exceeded 80°C, which has a 0.3 probability if efficient but 0.8 probability if not efficient. Given this information, the engineer should revise the probability of peak efficiency to 57.5%. 2. A sales manager estimates high sales at 0.2, medium at 0.7, and low at 0.1. A forecast predicts high sales. Given probabilities of the forecast accuracy, the manager should revise estimates to high sales at 0.36, medium at 0.56, and low at 0.08. 3. A retailer must decide between large or small stock for summer

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Decision Tree Exercise – Bayes

    1. An engineer in makes a cursory inspection of a piece of equipment and estimates that there is a
    75% chance that it is running at peak efficiency. He then receives a report that the operating
    temperature of the machine is exceeding 80◦C. Past records of operating performance suggest
    that there is only a 0.3 probability of this temperature being exceeded when the machine is
    working at peak efficiency. The probability of the temperature being exceeded if the machine is
    not working at peak efficiency is 0.8. What should be the engineer’s revised probability that
    the machine is operating at peak efficiency?

    2. A company’s sales manager estimates that there is a 0.2 probability that sales in the coming
    year will be high, a 0.7 probability that they will be medium and a 0.1 probability that they will
    be low. She then receives a sales forecast from her assistant and the forecast suggests that sales
    will be high. By examining the track record of the assistant’s forecasts she is able to obtain the
    following probabilities:
    𝑃(ℎ𝑖𝑔ℎ 𝑠𝑎𝑙𝑒𝑠 𝑓𝑜𝑟𝑒𝑐𝑎𝑠𝑡 𝑔𝑖𝑣𝑒𝑛 𝑡ℎ𝑎𝑡 𝑡ℎ𝑒 𝑚𝑎𝑟𝑘𝑒𝑡 𝑤𝑖𝑙𝑙 𝑔𝑒𝑛𝑒𝑟𝑎𝑡𝑒 ℎ𝑖𝑔ℎ 𝑠𝑎𝑙𝑒𝑠) = 0.9
    𝑃(ℎ𝑖𝑔ℎ 𝑠𝑎𝑙𝑒𝑠 𝑓𝑜𝑟𝑒𝑐𝑎𝑠𝑡 𝑔𝑖𝑣𝑒𝑛 𝑡ℎ𝑎𝑡 𝑡ℎ𝑒 𝑚𝑎𝑟𝑘𝑒𝑡 𝑤𝑖𝑙𝑙 𝑔𝑒𝑛𝑒𝑟𝑎𝑡𝑒 𝑚𝑒𝑑𝑖𝑢𝑚 𝑠𝑎𝑙𝑒𝑠) = 0.6
    𝑃(ℎ𝑖𝑔ℎ 𝑠𝑎𝑙𝑒𝑠 𝑓𝑜𝑟𝑒𝑐𝑎𝑠𝑡 𝑔𝑖𝑣𝑒𝑛 𝑡ℎ𝑎𝑡 𝑡ℎ𝑒 𝑚𝑎𝑟𝑘𝑒𝑡 𝑤𝑖𝑙𝑙 𝑔𝑒𝑛𝑒𝑟𝑎𝑡𝑒 𝑙𝑜𝑤 𝑠𝑎𝑙𝑒𝑠) = 0.3
    What should be the sales manager’s revised estimates of the probability of (a) high sales, (b)
    medium sales and (c) low sales?

    3. A retailer has to decide whether to hold a large or a small stock of a product for the coming
    summer season. A payoff table for the courses of action and outcomes is shown below:
    The following table shows the retailer’s utilities for the above sums of money (it can be assumed
    that money is the only attribute which he is concerned about):

    The retailer estimates that there is a 0.4 probability that sales will be low and a 0.6 probability
    that they will be high. What level of stocks should he hold?
    Before implementing his decision the retailer receives a sales forecast which suggests that sales
    will be high. In the past when sales turned out to be high the forecast had correctly predicted high
    sales on 75% of occasions. However, in seasons when sales turned out to be low the forecast had
    wrongly predicted high sales on 20% of occasions. The underlying market conditions are thought
    to be stable enough for these results to provide an accurate guide to the reliability of the latest
    forecast. Should the retailer change his mind in the light of the forecast?

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