Decision+Tree+Exercises - Decision Tree Exercises 1....

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Decision Tree Exercises 1. (Relatively Easy) George has three choices for spending his time on Saturday. He could go to a concert, a rugby game, or on a hike. His payoff in dollar terms is dependent on whether or not it rains. The net payoff (i.e. Payoff – Costs) is shown in the following table. Choice Payoff if it rains Payoff if it doesn’t rain Concert 5 2 Rugby game 5 3 Hike 2 5 a. Draw the decision tree for George b. Is there an option he would never choose whether or not it rains? c. If there’s a 50%/50% chance of rain/not rain, what will George do? d. If there’s a 30%/70% chance of rain/not rain, what will George do? e. If there’s a 70%/30% chance of rain/not rain, what will George do? 2. (Harder) A pharmaceutical firm is considering whether to begin research on a drug that would cure a rare illness. Only 100,000 people have this disease, and once the current infection is cured, the bacteria causing the illness will be extinct. The scientists tell you that they have a 5% chance of discovering the cure before anyone else. There is a 95%
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Decision+Tree+Exercises - Decision Tree Exercises 1....

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