Problem
THE SS KUNIANG
In the early 1980s, New England Electric System (NEES) was deciding how much to bid for the salvage rights to a grounded ship, the SS Kuniang. If the bid were successful, the ship could be repaired and fitted out to haul coal for its power generation stations. The value of doing so, however, depended on the outcome of a Coast Guard judgment about the salvage value of the ship. The Coast Guard's judgment involved an obscure law regarding domestic shipping in coastal waters. If the judgment indicated a low salvage value, then NEES would be able to use the ship for its shipping needs. If the judgment were high, the ship would be considered ineligible for domestic shipping use unless a considerable amount of money was spent in fitting her with fancy equipment. The Coast Guard's judgment would not be known until after the winning bid was chosen, so there was considerable risk associated with actually buying the ship as a result of submitting the winning bid. If the bid failed, the alternatives included purchasing a new ship for $18 million or a tug/barge combination for $15 million. One of the major issues was that the higher the bid, the more likely that NEES would win. NEES judged that a bid of $3 million would definitely not win, whereas a bid of $10 million definitely would win. Any bid in between was possible.
Questions
1. Draw an influence diagram and a decision tree using PrecisionTree for NEES's decision.
2. What roles do the two diagrams play in helping to understand and communicate the structure of this decision? Do you think one representation is more appropriate than the other? Why?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.