Problem_Session_7

# Problem_Session_7 - MS&amp;E 252 Decision Analysis I...

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Decision Analysis I Problem Session 7

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What concepts do we expect you to master? Decision Diagrams Probability Encoding 20 Questions Quantitative Problem A quick overview of MS&E 352 – DA2
Why are decision diagrams important? Facilitates communication. Grows linearly, unlike trees that grow exponentially. No degrees and no probabilities yet! Therefore no clarity test required Enables high level abstraction

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Decision diagrams contain four kinds of nodes. Decision Node Uncertainty Node Deterministic Node Value Node F(x,y) x y
For example, in Kim’s party problem… Uncertainty Sunny or rainy weather? Value Value to Kim (\$) Decision Where to have the party? Type of Node Corresponds to

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Four kinds of arrows indicate conditioning. Informational Arrow Relevance Arrow Functional Arrow Influence Arrow A B C D 2 D 1 E D F D C “B is conditioned on A, and may be relevant to A.” “C and D 1 are known when D 2 is made.” “F is a deterministic function of D and E.” “My choice in decision D may affect the distribution of uncertainty C.”
Let’s draw the decision diagram for Kim’s party problem. Kim decides without knowing the weather Kim’s value = fcn (W,L) \$ ? Kim’s decision does not modify the weather Weather Location Watch out for “rookie mistakes”!

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Let’s try it on another example! DA Corp. is thinking of investing in research on a new drug, “Clear Voyance”. “Clear Voyance” would instantly and painlessly cure any eyesight problem. They estimate that if they decide to invest in research, technical success will only be 20% likely. However, once they have technical success, they have a 90% chance of marketing success. DA Corp. also needs to decide whether they should proceed to preliminary testing that will give an indication on the chances of technical success. How would you set up a decision diagram for this example?
Here is a possible decision diagram for DA Corp.’s decision \$ Marketing Success Proceed to Tests Report Technical Success Test Indication Invest in Research Exercise – Name all the kinds of arrows on this diagram

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What concepts do we expect you to master? Decision Diagrams Probability Encoding 20 Questions Quantitative Problem A quick overview of MS&E 352 – DA2
Why do we need probability encoding? Probability encoding is a process

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## This note was uploaded on 06/16/2010 for the course MS&E 252 taught by Professor Howard during the Fall '08 term at Stanford.

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Problem_Session_7 - MS&amp;E 252 Decision Analysis I...

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