MGS 3100 Chapter 9: chapter 6 part 2
Document Summary
Chapter 6 decision analysis part 2: help determine the probability of an event, based on having prior knowledge about another event that might be related to the event that we are interested in. Creating a double tree: we get some new information about the economy, collect historical data and separated by when we had, high demand. Low demand: the looked at when had. Improving economy: not improving economy, we get two tree since we got new information about improving and not improving economy, the choices doesn"t change and payoff doesn"t change, the only different is probability. Calculating the probability of being in each new tree (what value add to 1?) We want to know what the probability of an improving or not improving economy occurring is. Calculating the new probabilities for the states of natures in each the new tree (posterior. We want to know what probability for high and low demand for the improving econ tree.