THEEVOLUTIONOFVR-CEE5980.docx (1)

Project Report CEE 5980 – Introduction to Decision Analysis, Cornell University, 2016-17
Evolution of Virtual Reality – A Literature Review
Jeyapandian, Lesslie, ljj36@cornell.edu; Kurapatti Ravi, Abinesh, ak2472@cornell.edu;
Joshi Ravindranath, Rahul, rr695@cornell.edu; Rahman, Mohammed Waliur,
mr2232@cornell.edu.
Abstract - Virtual Reality (VR) is a rapidly growing technology that has applications
in various fields. Both the hardware and software industry is constantly evolving to
support each other, and to match the industry’s demands. Cumulative investments
in this technology have reached about $4 billion since 2010. This paper presents a
thorough look at the evolution of 4 sectoral applications, namely, gaming,
manufacturing, industry and education. The advancement and use of this
technology has psychological implications to the users, which have been highlighted
in this review.
Keywords – Virtual Reality, Psychological effects, Manufacturing, Gaming, Industry,
Education, Decision analysis, Paradoxes, Biases, Subjective elicitation, Sectoral
evolution, Trade-offs.
1. Introduction
VR is a computer-generated platform
that can place the user in a virtual world
using software and accompanying
hardware. On the hardware side, within
the next 5 years, the CAGR will be
100% [1]
, reaching about $150 billion by
2020[2]
. Tech giants like Facebook
(Oculus) and Google (Google glass) are
leading the charge towards these
numbers, which may drive up
competition as well as lower the device
prices. VR applications are being used to
satisfy various requirements by
industries, like exploring space [3]
, or
training of doctors through virtual
surgery [4]
. To understand the direction
and speed of this industry, this paper
delves into the 4 sectors as mentioned
below:
1. VR/AR in the Aerospace
Manufacturing Industry
2. VR in the Gaming Industry
3. VR in Engineering
4. VR in Education
2. Virtual Reality in Aerospace
Manufacturing
Manufacturing is a complex and
expensive process. Starting from the
roots of new product development to the
assembly line and finished product, there
are multiple regulations as well as
competition to deal with. Manufacturers
have always tried to look at cost
reduction techniques without
compromising the integrity and quality
of their products [5]
, which was a driving
force for Virtual Reality (VR) and
Augmented Reality (AR)’s entry into the
industry. The two technologies are being
integrated into aerospace manufacturing
in the software and hardware arena, with
applications not limited to product
development, training, maintenance, and

worker safety. Combined VR and AR
sales have been forecasted to reach $150
billion by 2020[6]
.
To understand the extent of growth
that is projected for both AR/VR, we can
look at a study conducted by PwC [7]
where 120 manufacturers from the
United States gave their perspectives on
VR/AR adoption. About two-thirds of
the manufacturing industry are at various
stages of technology adoption with about
18% of the surveyed planning to adopt
AR/VR within the next 3 years. As the
adoption of these technologies becomes
mainstream and global, with
demonstrated improvements in
productivity and product development,
the need to adopt VR/AR will be a
requirement to stay in the competition.
In Appendix A, figure 1.1[7]
, shows data
populated from the PwC report on
current applications of VR/AR.
While the aerospace industry is
always ready for new enterprises,
investments in these arenas must be done
with extreme deliberation and care due
to the magnitude of costs in developing
new products [8]
. Training was often
necessary for the users to overcome the
difficulties of technology-user
interfacing with VR. The interfacing too
adds to the capital costs with special
equipment like gloves and helmets [9]
.
Embraer inaugurated its Virtual
Reality center, with its modern graphic
visualization capabilities. The engineers
could see and manipulate electronic
models of aircraft structures and systems
during the development phase. The
customers could follow this process too
and can keep track of the internal
configurations as well as the paint
scheme. Boeing, in partnership with
Iowa State University [10]
, proposed a
study which concluded that AR as a
work instruction delivery method
increases first time quality and reduces
task time. Airbus developed its Mixed
Reality Application (MiRA), which is
composed entirely of digital tools. It
increased productivity on production
lines, especially with error detection [11]
.
In the commercial airline space, the
engineers are using MiRA in
conjunction with Realistic Human
Ergonomic Analysis (RHEA) to mock
up a geolocated 3D digital model of the
whole aircraft [12]
. In real time, it helps
them to call a 3D image of a component
they are assembling onto the aircraft to
minimize errors in installation. A final
case would be to look at ICIDO’s foray
into VR [13]
by using this technology
throughout its aerospace product
engineering process, which produced
quicker turnaround results, higher
performance and faster real time
decision making. With all of this
information in mind, the author looked
towards understanding the common
man’s interest in investments for VR/AR
into the manufacturing sector.
Methodology of Subjective Elicitation
Appendix A, figure 1.2 shows a
decision tree that was presented to 55
participants who elected to either invest
or not based on whether they had a basic
knowledge of VR/AR. The participants
who had prior knowledge were given the
above-mentioned information about
VR/AR’s adoption and applications in
the aerospace manufacturing setting. A
formal decision was to be made with
arbitrary values for both X and Y.

Results
The preferences elicited from the
control group yielded 75% of the
participants leaning towards not
investing in VR/AR. The lack of
information for X and Y was cited as the
primary reason, leading to the
conclusion that value of information is
of utmost importance to avoid any biases
in preference.
3. Virtual Reality in the Gaming
Industry
The gaming Industry constitutes
60% of the overall VR market. The
virtual reality gaming market size is
expected to reach USD 9.5 Billion by
2022. The VR hardware component
which comprises of head mounted
displays, motion tracker systems have
received significant investments and
comprise of 55% revenue share in 2014.
Xbox by Microsoft, PlayStation by Sony
and Nintendo Wii are the major industry
competitors. Asia pacific virtual reality
gaming market is expected to grow at a
CAGR of over 25% by 2022 due to
increase in buying power and increasing
youth population in India, China and
south east Asian countries. [14]
This is
bolstered by the presence of game
console giants like Sony and Nintendo in
the Asia pacific region. Major
companies involved in the developing of
the hardware components include
Activision publication, Electronic Arts,
Kaneva, Linden lab, Oculus VR and
Sony.
Industry Scenario in 2016
As can be seen from Appendix
A, figure 1.3[17]
, the year 2016 was a
make or break year for the second
coming of VR in the gaming industry.
Sony launched the project Morpheus
headsets in October 2016. HTC Vive’s
head mounted display product was
launched in April 2016. Oculus rift is
expected to launch its VR headset in
march 2017. Getting users to experience
VR technology firsthand and therefore
truly understand it’s potential remains
the major challenge. [15]
With all the
major competitors having major
launches scheduled within a short period
of time, the current market scenario is
highly competitive. As a private equity
investor interested in investing in VR
gaming technology, which company
would you invest in?
Survey Experiment
Ever since oculus rift was
acquired by Facebook, it has had a high
brand recognition going for it.
Additionally, it has decided to create its
own controllers. Partnership with
Microsoft to ship Xbox one controllers
has enhanced the hype. Facebook’s
financial backing ensures that oculus rift
is financially covered. The only
drawback of the oculus rift is the
requirement of a heavy PC to immerse in
the VR experience. Sony has its own
movie and television studios, a huge pile
of cash and a PS4 to its credit. This
means the company can supply its own
content and it has a readymade legion of
loyal customers at its disposal. [16]
Tech
review reports indicate that there is little
downside to Sony VR headset. The
above mentioned 2 factors of expected
rapid growth in the Asia pacific market
and the launch of 2 competing products
in Sony VR and Oculus rift VR formed
the basis of the survey. In 2016, the Asia

pacific region is still in the early
adoption stage of VR technology. All
this information was provided to 20
Private Equity Investors situated in
India. The survey was conducted in 2
parts. The first part of the survey was
conducted between mid-September 2016
till mid-October 2016 before the launch
of the Sony VR product. All investors
were asked a hypothetical question
whether they would invest in Oculus rift
VR technology or Sony PlayStation VR
technology. Everyone were asked to
make their decision with a $10 million
investment. At this point Sony VR
launched its project Morpheus PS4
product. The product launch was highly
successful. Sony CFO, Kenichiro
Yoshida stated that the demand for Sony
PS4 VR was greater than that for PS1 at
launch. Analyst firm, HIS Markit has
tentatively estimated 1.4 million units
will be sold this year. Of the confirmed
sales so far, Sony’s device has made an
impressive start. PlayStation VR outsold
every console on the market in Japan in
less than week from its release, selling
51644 units from October 13 through to
October 16. Should positive sales figures
continue to be a regular occurrence, then
Sony could be a game changer. Being
tied to a single device has given Sony
the chance to create an easy and cost
effective way for users to get into VR
gaming. [18]
Part 2 of the survey was
conducted from early November to
mid-November. The same 20 private
equity investors were asked to reassess
their investments. Now, Investors know
about the forecasted sales predictions for
Sony VR and its market value. The trend
is also clear. Thus with 1 decision
variable becoming clear, they were
asked whether they would still invest in
Sony VR or in Oculus rift.
Survey Analysis
When part 1 of the survey was
analyzed, 12 out of the 20 investors
indicated that they would invest in Sony
VR and 8 indicated they would invest in
Oculus rift VR. When part 2 of the
survey was analyzed, 17 of the 20
investors indicated that they would
invest in Sony VR and 3 indicated they
would still invest in Oculus Rift. This
signaled a 62.5% shift in the number of
people who changed their decision after
Sony VR was launched. This is a clear
case of Ellsberg Paradox. This survey
bought out the risk averse nature of
investors. After one decision variable
became clear, they decided to go with
the known variable and not take a risk
with the unknown variable. Furthermore,
Investors who changed their mind
midway were asked about the price they
would be willing to pay to know
beforehand the forecast sales of Oculus
Rift VR. This removes uncertainty from
the entire decision making process.
These investors suggested that they
would be willing to pay up to $480,000
to know the information beforehand.
Thus for this survey $480,000 was the
expected value of perfect information.
Results
The survey gave an insight into
investor mentality and the future market
projections of VR technology in the
gaming industry. Risk aversion and loss
aversion play a major role in investor’s
decision, even in an industry which is
undergoing an upward trend. While there
is no doubt that VR technology is the
future of the gaming industry, a
challenge still exists in increasing

accessibility and making it as user
friendly as possible. Also, it is not clear
yet who the industry leader is in the
gaming industry with respect to
adaptation of VR technology. This has
set up the market for a very interesting
next few years where a highly
competitive industry is going to evolve
and mature.
4. Virtual Reality in the Industry
For this research, the focus of
VR and AR industry’s boom has been
studied in the Oil & Gas sector, specially
the upstream sector consisting of
exploration and production of oil. The
Oil & Gas industry incorporates a broad
range of engineers who work hand in
hand at various issues [20]
. Taking
examples of the offshore industry in the
North Sea, which is the densest oil rig
zone in the world consisting of 184 rigs
[21]
; Issues have been derived which are
common in the industry. The magnitude
of the industry risk in this North Sea
zone can be estimated by calculating the
requirement of hundreds of workers in
each of the 184 platform who work 24
hours a day all year long. In addition,
there is a requirement of nearby vessels
and logistics at all times.
Analyst reports
Goldman Sachs report the
number of VR and AR users to rise by
300% between 2020-2025 increasing the
revenue 3-folds to a dollar value of $4.5
Billion making it the second highest
industry after videogames [22]
. Tractica’s
reports on the industry predicts a growth
rate of 142% in the sales of the hardware
between 2014-2020 [2]
. Another report
from Digi-Capital showcases an increase
of $15 Billion in the industry revenue
between 2016-2017 [23]
.
Problems
Offshore safety was never taken
at heart until the Sea Gem platform
collapsed in 1965 introducing various
regulations [24]
. However, the industry
revolutionized various Offshore health
and safety regulations only after the
occurrence of a disaster in 1988 which
costed lives of 167 personnel [25]
.
Nevertheless, it must be noted that risk
management processes are major
successes onshore rather than offshore.
For example, changing a simply light
bulb offshore may require multiple
permits depending upon the time of day
and the area of change. Additional
problems that may be noticeable directly
impacts the cost. For example, sending
workers offshore for training and
acclimatization which uses up bedding
space for a more skilled labor. Chadwell
et. Al studied the role of human error in
petroleum industry which lead to
significant costs both monetary wise as
well as safety. The outcome of the
research displayed 47% of the error to be
caused due to casual factors [26]
.
Instances included inexperienced
workers reporting difficulty in reading
operator manuals or perhaps the
unavailability of an operator at the time
of an equipment or process failure [26]
. A
separate discipline of study called the
Human Factors Engineering (HFE)
highlights the various concerns with
improving human decision making and
reducing human error in complex work
environment. Studies from offshore
provide examples such as lack of
provision to collect mud pit samples
which may directly expose workers to

hazardous vapours or perhaps design
induced error which may cause failure or
breakdown of equipment, ultimately
leading to maintenance liability [27]
.
Another major problem that should be
considered in the industry is the
Offshore Liability Coverage policy.
Though, quite undervalued and
undiscussed, it potentially plays a huge
role in human decision making. These
coverages are not insurance policies but
company written indemnity policies for
operators and contractors. However, the
biggest challenge that lies is the fact that
they are highly customized products
with coverage ranging from one price to
another for one type of worker to
another at the discretion of the company
[28]
. Examples of major cost impacts to
companies have included - the Super
Puma helicopter accident in 2009, which
killed all 16 on-board including a first
time flyer [29]
and the unsolved case of
another Super Puma accident in 2013
which killed 4 and injured 14 people
onboard [30]
.
Where the conundrum lies
Multitudes of decision making
problems arises which can be
summarized in the following sectors:
Supply Chain – Tradeoffs between
choosing logistics and environmental
fees may lead to faulty decision making.
For example, “Should a company break
environmental limitations to retain
production? Is it cheaper to dump
excessive sand in the water than to ship
it back onshore?”
Monetary – Maximizing the efficiency
of bed space usage due to being limited
in number remains a major challenge.
There is no perfect answer for a question
like, “Is it profitable to delay overdue
work to train an inexperienced worker
instead? When would be the perfect time
to train someone?”
Risk – It is evident from the past
incidents like Piper Alpha (1988) [25]
and
the Deepwater Horizon (2010) [31]
where
hundreds of lives have been lost due to
failure of decision making by Offshore
Installation Managers (OIM). Now,
“Should the lives of 200 workers be
relied on one person’s decision?”
Value – Offshore Liability Coverage is
subjective to the company. “How much
are you willing to pay for the cost of a
worker’s life? Is the life of a plant
manager worth more than an intern?”
It is evident that moral hazards arise in
this industry and may also lead to fallacy
of centrality by managers who prioritize
production over risks. However, who
decides whether these subjective
probabilities are right or wrong?
Company policies post-mortem often
leads to many loopholes [32]
.
The technology
Two major companies have been
highlighted in this study – OPTECH 4D
and DAQRI. OPTECH 4D provides both
VR and AR solutions to various Oil and
Gas companies providing real time
offshore simulation which includes
minute details of an offshore plant. A
sample image of the simulation screen
can be seen in Appendix A, Figure 1.4.
These can be used to train inexperienced
operators and provide in-house tutorials
to prevent inaccuracy in decision making
and having valuable time offshore. Not
only do they incorporate VR solutions

but provide AR solutions to provide
comprehensive details of equipment
along with exploded view of all the
parts. They provide e-manuals for
maintenance and operational
instructions.
Appendix A, Figure 1.5 shows
the exploded view of a pump using
OPTECH 4D’s AR tool. Figure 1.6
showcases the DAQRI smart helmet
along with a live view of AR used in the
industry, which can be seen in Figure
1.7. DAQRI specializes in AR safety
helmets for industry workers who can
use smart technology to connect to
onshore experts and view flow rates and
temperatures without even touching an
equipment [33] [34]
.
Benefits
The author believes that VR and
AR are crucial game-changers in this
risky industry. Not only problems of
supply chain, cost and health can be
minimized, VR provides a direct route
for saving the company plenty of time
by preventing untrained workers from
reaching without adequate knowledge.
These tools do not only serve as tools for
decision making but also tools for
educating industry workers at a
comfortable and cheap environment.
One example of the various case studies
includes the National Training
Laboratory simulating training of
offshore workers to study the retention
ratio. A surprisingly 75% workers
retained information via VR/AR
technology as compared to other reading
and classroom based training of 5% and
10% [35]
. Perhaps, the magnitude of the
benefit can be measured by taking
examples of platforms which produce
about 30,000 barrels/day and may have
production downtime due to the operator
mistakenly closing the wrong valve at
the wrong time or freezing the wrong
pipe at the wrong time [36]
. Life
threatening diseases can be prevented if
the operator prevented the continuous
exposure to hazardous gases just because
he wasn’t technically aware [37]
.
5. Virtual Reality in Education
This section of the report will
delve into the evolution of VR in the
Education sector. VR has been applied
in the Educational sector since as early
as 1982. However, early applications
lacked the technological finesse and cost
too much to develop to become widely
accepted among the general public. As a
consequence, VR was only first applied
to the Educational sector in the form of
Flight simulation training for personnel
in the U.S. Air Force. Since then,
research and development into the
utilization of VR in Education has
identified unique problems which are
being addressed in the modern
re-introduction of VR in Education.
VR technology has always been
given special interest with regard to
Education due to the myriad of benefits
that could be realized with its
introduction into the sector.
Visualization of abstract concepts,
outreach education, observation of
events both at planetary and atomic
scales and interaction with unsafe
environments from a distance are some
of the issues faced in the Educational
sector that can be addressed by Virtual
Reality.
History of VR in Education

Since its mental inception in the
1930’s, the subsequent conceptualization
in 1962 in the form of Morton Heilig’s
“Sensorama”, considered to be the first
Virtual Reality device invented and the
eventual emergence of VR across a
multitude of industries in the 1990’s, VR
has always been in danger of
disappearing into its own hype. [38]
During the late 1980’s, VR as a concept
caught the imagination of both industry
experts and laymen equally, leading to
an unprecedented level of chatter about
the technology, both in print and visual
media. This hype over VR led people to
collectively assume that the technology
referenced in popular media was already
at hand and it was only a matter of time
before VR replaces existing technology.
This was a classic case of
framing blocks in decision analysis
leading to a lack of alternatives which
resulted in a slump in the research into
the industry in the early 1990’s. Upon
reframing the problem facing the
industry to be more reflective of the
current state of the industry and not
resorting to collective speculation,
researchers and developers spearheaded
an unprecedented boom in the sectoral
applicative introduction of VR in
Education. A few formative successes
are discussed in the following sections.
Evolution of VR in Education:
In his 1993 paper titled “Physics
Education in the Virtual Environment”,
Brelsford reported on the success of a
Physics simulator designed to give
students better intuition of the subject. In
this system the students were given a
controllable length pendulum and three
balls of variable mass. They were
allowed to manipulate gravity, air drag,
friction and several initial conditions and
were directed to perform experiments for
an hour (after some introductory
instruction about the system). A control
group of students was given a lecture for
an hour over the same material. Four
weeks after the exposure, the students
were recalled and given a surprise exam
over material covered in the
experiments. Both the junior high and
the college student groups who had
experimented in the virtual laboratory
showed better retention than the groups
who had been given the lecture. [39]
Brelsford’s simulator focused on
specific task training, meaning that the
VR environment allowed the user only a
specific means to interact with the
system. In this case, the user can vary
inputs to achieve a specific goal. It was
not left to the User to interact with the
system in any way he or she chooses.
The alternative to this methodology was
termed “General Education Technology”
and this approach to VR education
allowed for free running interaction with
an environment by the user allowing for
a broader and more versatile educational
environment. One of the earliest
applications following this approach was
the VR Gorilla Exhibit which was
implemented in a zoo in Atlanta in 1998.
[40]
This VR exhibit allowed the students
to interact, mold and change a mock
enclosure of Gorillas. It also allowed
them to see virtual gorillas interacting
and socializing, mimicking actual
gorillas. Among the students that were
allowed to interact with this exhibit, it
was found that there was greater
retention of information, higher interest
and more curiosity and it was successful

in combating the attention span problem
that is reflective of any educational
method targeted at children. This is
because the exhibit was designed such
that children learn as they interact based
on where their interests and fascinations
takes them.
From here on out, VR in
education was more reflective of
“General Education Technology” as
opposed to “Task Specific Training” and
the bulk of developments from 1998
followed this methodology in the design
and implementation of VR technology in
Educational applications. Now, that the
ideal methodology had been identified,
the next step in the evolution of VR dealt
with questioning the fundamental
assumption of the VR industry in
general. This was the assumption that
Virtual Reality was solely a
technological advancement not unlike
the radio or television and hence can
readily accommodate any transition of
existing media from visual or auditory
format to a “VR format”. This
assumption was challenged by R. Aylett
and S. Louchart in their 2003 paper titled
“Towards a Narrative theory of Virtual
Reality”. [41]
They made the argument
that VR should be considered as a
separate narrative medium like theatre,
literature and cinema. Their primary
argument in support of this postulation
was that VR unlike movies, novels or
plays was more user centric and
essentially made the participant an
“User” as opposed to a spectator as was
the case with traditional narrative
mediums. Emphasis must be given on
User input and interaction. The most
obvious demonstration of the
requirement of such a medium is that in
a virtual environment unlike a play or a
movie, the user can opt to follow a
“Process View” of the story rather than a
“Chronological View”. This has
implications in the narrative medium
used in VR.
In conclusion, though the
technology seems to have caught up with
our imaginations, for an effective
implementation of VR in the
Educational sector, the next step
involves developing a narrative medium
that is representative of VR. This has to
be done while ensuring that creative
blocks do not hinder research by stifling
the generation of alternative solutions in
the development of this new frontier in
Educational technology.
6. Conclusion
Across the platform, in all
applications of VR discussed in this
literature review, it can be seen that the
“User” is at the center of current
research and development. Whether it
was modelling and optimizing the design
interface for the user as in the case of
VR manufacturing or maximizing
benefits for the user as in the case of
industrial VR applications or developing
a new narrative medium for effective VR
application in the case of Education, the
“User” is the principal focus for the
development of VR and hence, the
psychological implications of virtual
reality use is a fundamental caveat of
this new technology that is to be
explored.
For instance, in the gaming industry,
research has been done into the
psychological implications of VR as a
gaming platform. Calvert and Tan
reported that young adults increased

more in arousal (pulse rate) and had
more aggressive thoughts when playing
an FPS (First person Shooter) game in
an immersive VR platform as compared
to individuals using non-VR platforms.
[42]
Concerns have been raised about
desensitizing and VR. VR games and
military training platforms which subject
the users to simulated violence have
been indicative of affecting the user to
become less empathetic and
compassionate and in fact actively seek
out violent scenarios in gaming
interfaces to perhaps feed the adrenaline
rush associated with violence in games.
In the case of using VR to train
individuals for sea survival and general
safety practices in the event of an
emergency onboard offshore oil rigs,
even though VR as a platform is able to
replicate the physical situation as a
simulation, it is difficult for the “User”
to envision the “perceived reality” as a
real life-threatening situation and hence
there is a possibility for ineffective
training. It is more or less the same case
with actual physical training. The
problem then becomes a question of
whether or not the benefits brought in by
utilizing VR for training in the industry
outweigh the obvious disadvantage of
such a system being less representative
of real world emergencies (compared to
on-site simulation and training).
To sum up, Virtual Reality has
come a long way from the first
“Sensorama” developed in 1962. Along
the way, major research in the field has
honed the platform as a whole to be
representative of a new research and
development taking into effect factors
ranging from psychological implications
to narrative theory utilized in
development of VR. Current research is
looking into the psychological
implications of virtual reality use across
all platforms. VR is still a developing
technology, and there is a need to
continue research into monitoring the
types and levels of symptoms
experienced by VR participants as
systems develop. Some VR participants
are still experiencing symptoms to an
uncomfortable and distressing level – it
is therefore still necessary to identify the
exact causes of these symptoms and
ensure that future systems take this as a
factor in the research and developmental
stage of the product. [43]
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