COMMERCE 3QA3 Lecture 24: Lecture 24 (Autosaved)
9 Mar 2018
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Decision tree for multistage (>= 2 stages) decision problems: several decisions over a period of time, payoff tables can be used but thery are cumbersome. Bayes theorem * not on the exam or quiz * or you can us your best judgement to calculate the probabilities * what we use in the class * Decision node 1(time 0): do survey or do not do survey (there is a cost associated with it) Thus 2/3 of those are actually positive results unlike the if we do choose to do the survey we have 50/50 chance of getting positive or negative results and then we have 2/3 payoff for the positives. If you do or do not choose to do the survey really impacts the results because of the cost of the survey. Optimal solution(optimal strategy) is to conduct survey, if you get a positive go large, if negative you go small.
