Re: project part 1, question 3 (*important*--I am changing this part and making it optional Extra Credit)

[Subbarao Kambhampati <rao@asu.edu>]

At 03:38 PM 11/29/2001 -0700, you wrote:
>It looks like the question is whether Mr. Burns should pay for a $1000 
>test or
>risk paying $2500.  What happens if he pays for the test, and it shows 
>that the
>heavy water is low quality?  If he has to pay the $2500 anyway, the 
>question is
>trivial, but if he pays nothing it is unrealistic.


Sorry... I messed up the question. You are right--there is no value for 
information unless you plan to "use" that information to change your 
actions. [Why should I care about the insider trading information, if I 
have no way of capitalizing on it, for example?--you can't eat 
probabilities... only the dollars you get through decisions :-)

To make this happen, I changed the question significantly so that it 
becomes an issue of whether or not Mr. Burns should buy insurance to cover 
his a**
against costly law suits that Springfield's normally stoic citizenry are 
threatening him with.

Since the question is being changed in the 11th hour, and since the whole 
value of information has not been specifically discussed in the class, I am 
making this part of the project "Extra Credit" (i.e. you don't have to do 
it to get 100%).

The new version of the question is attached. I am changing the online 
version of the project so it reflects this new version.

Rao

***Changed version

3. [Value of Information](***Extra Credit---Try this after everything
   else is done***)[Changed on [Dec 02, 2001])

 Given that the holiday season is coming, and liquified slurpees and
glowing employees don't exactly make for a festive season (although
opinions vary on this according to Bart), the town sent a
representation to Mr. Burns threatening that if there is a KABOOM
during the holiday season, and the town festivities get affected, they
will sue Mr. Burns for 100,000$. (Assume that their suit, once
entered, will be upheld by the bleeding-heart juries over at
Springfield).

Now Mr. Burns has to decide whether he should take up a
"Mid-christmas-Kaboom" insurance for his reactor or not. The insurance
costs 10,000$ for the christmas season and will then indemnify
Mr. Burns to all Kaboom-related suits. 

Qn A: Up front, should Burns take the insurance or not? (use an analysis
of expected costs and benefits).

Now, it turns out that there is a test available that tells Burns for
certain if the spring field reactor has low quality heavy water (I
can't go into details but it involves extracting a sample of the heavy
water from the plant and mixing it into the draft over at Moe's bar
and do a biopsy on Barney Gumble). The test costs 1000$ (990$ for
extracting a sample, and 10$ for cutting up Barney over in the Town's
hospital). Burns is trying to make up his mind whether it is worth the
money to do the test. (The value of the test is that once he knows
whether he has low quality heavy water in the plant, he can make a
more informed decision about whether or not to buy the costly
insurance.)
 
His question is whether he really should get the test done. Now,
Mr. Burns is, as we all know, immune to the human emotions, and does
cold bayesian dollar calculation to decide whether an action is worth
it.

Qn B. Your task is to find out, using the bayes net tool, along with the
"value of information theory" tell Mr. Burns to do the test or not do
the test. Explain your reasoning.

You may want to read up the discussion on value of information