In the Name of God

Structural Reliability and Probabilistic Modeling

Mojtaba Mahsuli

Assignment 2
Deadline: Monday, Esfand 12, 1392

Problem 1
Insuring the contents of a house
A householder is currently considering insuring the contents of his house against earthquake for one
year. She/he estimates that the contents of her/his house would cost her/him $20,000 to replace.
Past seismic activity indicates that there is a probability of 0.03 per year for the occurrence of a
destructive earthquake. If such an earthquake occurs, her/his losses would be 10%, 20%, or 40% of
the contents with probabilities 0.5, 0.35 and 0.15, respectively.

An insurance policy from Company A costs $150 a year, but guarantees to replace any seismic
losses.
An insurance policy from Company B is less expensive at $100 a year, but the householder has to
pay the first x dollars of any loss herself/himself.
An insurance policy from Company C is even less expensive at $75 a year, but only replaces a
fraction, i.e., y%, of any incurred losses.

To solve this problem, you may assume that the probability of the occurrence of more than one
destructive earthquake in one year is negligible. Using the decision tree, answer the following
questions:
a) What would be your advice to the householder if x=$50 and y=40%?
b) Determine the maximum and minimum values of x such that the policy from Company B wins if
y=30%.

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 Structural Reliability and Probabilistic Modeling

Mojtaba Mahsuli

Problem 2
Repair decision for an offshore platform based on expected cost
An offshore structure for an oil platform has numerous X-braces for stiffness and strength to resist
lateral wave loads. A large storm occurs, and after the storm you, as the engineer in charge, are
concerned about whether any X-braces have been damaged. Based on past experience with similar
platforms and storms, you believe that the probability of no damage is 0.7, the probability of 1
damaged or missing brace is 0.2, and the probability of 2 damaged or missing braces is 0.1. You
consider it unlikely, i.e., zero probability, that 3 or more braces are damaged or missing. Due to the
high cost of underwater inspection, you would like to use techniques of structural identification to
determine whether any damage has occurred. A damaged or missing brace has the same effect on
the platform; it decreases the lateral stiffness and hence, increases the natural period of vibration.
You do a series of computer analyses on a model of the structure in which you determine the natural
period for the platform for cases with 0, 1, or 2 braces removed. The computer simulations include
reliability procedures to account for uncertainty in damping, mass, connection stiffness, etc. Based
on the computer runs, you get the following data on the natural period T:
Probability of T, given the number of braces removed
T = 0.25
T = 0.5
T = 0.75
Sum

0 braces removed
0.9
0.1
0.0
1.0

1 braces removed
0.6
0.3
0.1
1.0

2 braces removed
0.3
0.5
0.2
1.0

Assume that another big storm is inevitable, and if 2 or more braces are damaged or missing, there
will be a failure probability of 0.35 during the next storm at a cost of $20M. You may order divers
and repairs at an estimated cost of $2M, the cost to be incurred no matter how many braces are
missing, since the cost is primarily due to mobilization. You may also instrument the platform and
measure the natural period at a cost of $0.5M, and then make the decision on whether to send
down divers or do nothing.
a) Should you (A1) do nothing and accept the risk of the next storm, (A2) instrument the platform
and measure the natural period and then make your decision, or (A3) directly go ahead with
repairs?
b) If you do the instrumentation and find a period of T=0.5 sec., should you then call for the repairs
or do nothing?

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 Structural Reliability and Probabilistic Modeling

Mojtaba Mahsuli

Problem 3
Repair decision for an offshore platform based on expected utility
Suppose you are risk-averse with a utility function that reads

cB
u (c ) 1

W B

where u=utility as a function of the cost c, B=best outcome, i.e., the lowest cost, and W=worst
outcome, i.e., the highest cost.
a) Plot the utility versus cost for the above-mentioned function as well as for a risk-neutral utility
function. Comment on the plot.
b) In this situation, how would you make the decisions in Parts (a) and (b) of Problem 2?

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