ACCT-311 Lecture Notes - Lecture 3: Influence Diagram, Weighted Arithmetic Mean, Expected Value Of Perfect Information
2 Apr 2016
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Document Summary
Chance event an uncertain future event affecting the consequence, or payoff, associated with a decision. Consequence the result obtained when a decision alternative is chosen and a chance event occurs. A measure of the consequence is often called a payoff. States of nature the possible outcomes for chance events that affect the payoff associated with a decision alternative. Payoff a measure of the consequence of a decision, such as profit, cost, or time. Each combination of a decision alternative and a state of nature has an associated payoff (consequence). Payoff table a tabular representation of the payoffs for a decision problem. Decision tree a graphical representation of the decision problem that shows the sequential nature of the decision-making process. Node an intersection or junction point of an influence diagram or a decision tree. Decision nodes nodes indicating points where a decision is made. Chance nodes nodes indicating points where an uncertain event will occur.
