Suppose that an unmanned rocket is being launched, and that at the time of the launching a certain electronic component is either functioning or not functioning. In the control center there is a warning light that is not completely reliable. If the electronic component is not functioning, the warning light goes on with probability 1/2; if the component is functioning. the warning light goes on with probability 1/3. At the time of launching. an observer notes whether the warning light is on or off. I t must then be decided immediately whether or not to launch the rocket. Suppose that the losses, in millions of dollars, are as follows:
(a) Suppose that the prior probability that the component is not functioning is δ =2/5. If the warning light does not go on, is the Bayes decision 10 launch the rocket or not to launch it?
(b) For what values of the prior probability δ is the Bayes decision to launch the rocket, even if the warning light goes on?