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**Decision Analysis I November 16
**

th

. 2004

Page 1 oI 2 Decision Diagrams

Decision Diagrams

Definitions:

Decision Diagram: A conceptual representation oI a decision process used to provide the basic structure Ior a

decision problem. Includes uncertainties (like a relevance diagram). a value node. and at least one decision node.

Arrows in decision and relevance diagrams: The presence oI an arrow Irom uncertainty A to B or Irom B to A in a

relevance or decision diagram indicates that A and B might` be mutually relevant. given the state oI inIormation

represented by the other arrows into A and B. The absence oI an arrow between A and B asserts that A and B are

not relevant to each other. given the state oI inIormation represented by the other arrows into A and B. The

direction oI the arrow (whether Irom A to B or Irom B to A) indicates the order we would like to think oI the tree

as being in (might be diIIerent Ior assessment than Ior inIerence). The stronger statement is made by the exclusion

oI arrows.

Nodes in Decision Diagrams: the Iollowing table provides the diIIerent types oI nodes and their meanings

Decision

Node

A decision node may have an underlying structure oI a continuous decision variable

or a discrete set oI alternatives.

Uncertainty

Node

An uncertainty node represents a distinction in the mind oI the author that is

uncertain. An uncertainty node can represent a continuous or discrete random

variable or a set oI events. In general. we can think oI an uncertainty node as

characterizing a kind oI distinction within which there are two or more degrees or a

continuous distribution. We characterize the author`s uncertainty with a probability

assessed by the author or an expert designated by the author.

Deterministic

Node

A deterministic node means that iI the inputs to this distinction are speciIied. then

the value oI this distinction can be determined |i.e. deterministically|. We can think

oI a deterministic node as a special case oI an uncertain node where we have

asserted graphically that the conditional probability oI its value has been set to one.

Deterministic nodes will usually represent mathematical relationships. such as proIit

equals revenues minus costs.

Value

Node

A value node is designated by the author to be the quantity whose certain

equivalent is to be optimized by the decisions. Only one such node can be

designated. The value node is thus a special deterministic node; it is usually drawn

as a hexagon. octagon. or diamond.

MS&E 252 Handout #20

Decision Analysis I November 16

th

. 2004

Page 2 oI 2 Decision Diagrams

Arrows in Decision Diagrams: (also called arcs)

The set oI nodes with arrows leading into a particular node is that node`s parents. The Iollowing table shows the

diIIerent types oI arcs that can be Iound and their meanings.

Figure 1:

D1 D2

InIormation

Arrow

Figure 2:

A

D

InIormation

Arrow

An information arrow leads into a decision node Irom a decision

node (Figure 1) or Irom an uncertainty node (Figure 2).

In Figure 1. the inIormation arrow indicates that decision D2

is made with the knowledge oI the decision made in D1.

Since a decision-maker is assumed not to Iorget previous

decisions she has made. every decision node has an

inIormation arrow Irom each previously made decision.

ThereIore. inIormation arrows between decision nodes have

been called 'no-Iorgetting arrows.¨

In Figure 2. the inIormation arrow indicates that the outcome oI

uncertainty A is known by the time the decision-maker makes

decision D.

D

B

InIluence

Arrow

An influence arrow is an arrow Irom a decision node to an

uncertainty node. it indicates that the probability distribution

across the degrees oI uncertainty B is conditional on which

alternative is selected in decision D. Deterministic nodes can be

used (as report nodes) to avoid decisions inIluencing uncertainty.

especially when modeling inIormation gathering

A B

Relevance

Arrow

An arrow between two uncertainty nodes is called a relevance

arrow. Recall that a relevance arrow is a placeholder Ior

relevance. It indicates that the probability distribution across the

degrees oI uncertainty B is conditioned on each oI the degrees oI

uncertainty A.

We can reverse the direction oI a relevance arrow between two

uncertainties only iI they have the same set oI parents (i.e.

conditioned on the same state oI inIormation).

P

C

D

Functional

Arrows

An arrow Irom an uncertainty node to a deterministic node is

called a functional arrow. Here. Ior instance. once we know the

value oI uncertainty C and that oI uncertainty D. we can determine

the value oI P; in this example. P is simply the product oI C and

D.

Value

Node

D

Direct

Value

Arrow

An arrow Irom a decision node or an uncertainty node to the value

node is called a direct value arrow. Note that a decision-maker

seeks to optimize the value node by selecting an alternative in

each decision node. So. in general. we should have an arrow Irom

each decision node to the value node.

C

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