Decision Analysis 03(Oct 14)

Question 1

Differentiate between decision trees and influence diagram representation.

Answer 1

– Influence diagram representation: we focus on the main decision points, main uncertainties and main values. The goal is to express on the diagram the precedence relationship between the above (which comes before and which contributes to which).

– Decision tree representation: we try to represent all decisions and all possible outcomes of each uncertainty in a tree diagram

Question 2

• Decision path: A path starting at the leftmost node up to the… by selecting one alternative from a decision node or …
• Decision strategy: The collection of decision paths connected to one branch of the leftmost nodes by …
• Optimal decision strategy: The decision strategy which … (for instance EMV).

Answer 2

values at the end of a branch; by following one outcome from uncertainty nodes.

selecting one alternative from each decision node along these paths.

maximizes the objective function under the selected criterion

Question 3

• A decision tree can be solved by the following recursion:
  – Evaluate end-points: …
  – Roll back: …
• At each decision node, pick an action whose …
• Rolling back assigns to each node… given that this node is reached

Answer 3

Adjacent to each end point of the tree accumulate the net total cost that accrues if this end- point is reached.

Then moving from left to right
* At each chance node, compute the expectation of the cost.

expectation of cost is highest (lowest if minimization)

the highest expected total profit