In your Week 10 assignment you will develop quantitative (data-based) recommendations to inform decision-making. An understanding of risk and probability is required to make a sound recommendation. In this activity you draw influence diagrams and identify uncertainties, means objectives, and decisions to be made as you answer scenario-based questions.
Question 1
The US Federal Motor Carrier Safety Administration at one time planned to issue rules that would limit the number of hours per week that truck drivers could work. The rules would reduce driver workweeks (fewer hours), restrict the number of nights that truckers could work, and require rest breaks during the day.
The outcomes could include keeping sleep-deprived drivers off the road, reducing crashes, preventing fatigue-related crashes, improving working conditions, reducing driver turnover, improving driver safety, saving lives, reducing injuries, and reducing fatigue-related health problems.
Complete the following related to this proposed set of rules:
Identify the fundamental objectives for the government, trucking companies, and drivers:
Identify the means objectives:
Draw a fundamental objectives hierarchy below.
Draw a means-objective network that shows the relationships between the objectives below.
Question 2
Suppose that you were thinking of making an investment in two stocks—the ABC Aerospace Corporation and the XYZ Electronics Corporation—based on the advice on your stockbroker. From your readings of various stock market analysts’ reports, you understand that there is a 50-50 expectation that the stock price of ABC will go up (in other words, the probability of the stock increasing in price is 50%).
You also have learned that the stock price of the XYZ Corporation is correlated with the movement of ABC’s stock price since ABC is a major customer of XYZ. If the stock of ABC goes up, there is a 40% probability that the stock of XYZ will go up. However, if the stock of ABC goes down, the probability that the stock of XYZ goes up is only 20%.
Do the following:
Identify key uncertainties:
Identify the key decisions:
Draw an Influence Diagram below:
Sample Solution