Decision Trees and Influence Diagrams

In this chapter we have illustrated the construction of decision trees and the rollback method for
identifying the optimal policy. We describe an approximation method for dealing with continuous
probability distributions within decision trees and summarized some practical applications of decision
trees within decision analysis. Finally, we analyzed the process of generating decision tree representation
of decision problems and advocated the influence diagram as a key technique to facilitate decision
structuring.
In splite of the benefits f using decision trees, some decision analysts councel against using them
too early in the decision process before a broad perspective of the decision problem has been obtained.
For example, Chapman and Ward argue that decision trees should often be embedded in a more wideranging analysis that includes assessments of the sources of uncertainly and exploration of the decision
makers objectives. We broadly agree with this view and have therefore presented decision trees in the
book as just one of many potentially useful decision-aiding tools unlike most others decision analysis
texts, which focus almost exclusively on decision trees.
Constructing a decision tree
The branches that stem from this sort of node represent the possible outcomes of a given course
of action, circumstances that lie beyond his her control. The branches emanating from a circle are
therefore labeled with probabilities that represent the decision-makers estimate of the probabilities to the
branches that stem from a square.
Determinating the optimal policy
It can be seen that our decision tree consists of a set of policies. A policy is a plan of action
stating which option is to be chosen at each decision node that might be reached under that policy.
Decision trees and utility
Let us now suppose that the engineer is concerned that his career prospects will be blighted if the
development of the processor leads to a great loss of money for the company. The procedure for analyzing
the tree when utilities are involved is exactly the same as that which we used for the EMV criterion.
Decision trees involving continuous probability distributions
In the decision problem that we considered above there were only two possible outcomes for each
course of action, namely success and failure. Variable like these could be represented by continuous
probability distribution, but how can we incorporate such distributions into our decision tree formal ? One
obvious solution is to use a discrete probability distribution as an appromaximation.
Assessment of decision structure
Decision trees are the major analytical structures underlying the application of decision analysis
to problems involving uncertainty. Real-life decision problems may, at first pass, contain pieces from
many different jigsaws. The trick is to know which pieces are missing or which are either redundant or
not relevant to the problem analysis in hand.
Eliciting decision tree representations

What methods hae been developed to help elicit decision tree representations from decisionmakers ? one major method, much favored by some decision analysts, is that of influence diagrams.
Which are designed to summarize the dependencies that are seen to exist among events and acts within a
decision.
One step-by-step procedure for turning an influence diagram into a decision tree is as follows :

Identify a node with no arrows pointing into it

If there is a choice between a decision node and an event node, choose the decision node
Place the node at the beginning of the tree and remove the node from the influence diagram
For the now-reduced diagram, choose another node with no arrows pointing into it. If there is a

choice, a decision node should be chosen

Place this node next in the tree and remove it from the influence diagram
Repeat the above procedure until all the nodes have been removed from the influence diagram