Problem 1

27.0%
Branch #1
0

#NAME? Chance
A
0 #NAME?
73.0%
Branch #2
4
Decision
Problem 1
#NAME?
45.0%
Branch #1
10
#NAME? Chance
B
0 #NAME?
55.0%
Branch #2
0
 #NAME? #NAME?
A1
8 #NAME?
Decision
#NAME?
50.0% #NAME?
Branch #1
0 #NAME?
#NAME? Chance
A2
0 #NAME?
50.0% #NAME?
Branch #2
15 #NAME?

Part (1): See the above tree.

Part (2): 3 Decision Strategies

#NAME?
#NAME? Part (3):

Decision Strategy 1: B-Branch#1-Branch#2.

Decision Strategy 2: A-Branch#1-Branch#2-A1.
#NAME? Decision Strategy 3: A-Branch#1-Branch#2-A2-Branch#1-Branch#2.
#NAME?
Part (4):

The estimated value of this decision tree is 5.08. For the A-B decision, the decision branch A should
be selected. After making this decision, 73% of the time you will arrive at the minimum value of 4.
#NAME?
The remaining 27% of the time you will be faced with decision A1-A2. For this decision, the decision
#NAME? branch A1 should be selected, which will result in the maximum possible value of 8. Please see the
next tab (Problem 1_Optimal Tree) which shows the optimal decision strategy based upon the value
of EV for Problem 1.
on branch A should
nimum value of 4.
cision, the decision
8. Please see the
sed upon the value
PrecisionTree Policy Suggestion - Optimal Decision Tree
Performed By: DARAYI, MOHAMAD

Model: Decision Tree 'Problem 1' in [Week 2 Homework Suggested Solution.xlsx]Problem 1

1
A1
8
27.0% Decision
Branch #1
0 8
1 Chance
A
0 5.08
73.0% 73.0%
Branch #2
4 4
Decision
Problem 1
5.08
27.0%
8
PrecisionTree Risk Profile - Probability Chart
Performed By: DARAYI, MOHAMAD

Model: Decision Tree 'Problem 1' in [Week 2 Homework Suggested Solution.xlsx]Problem 1

Analysis: Choice Comparison for Node 'Decision' (D17)

Probabilities for Decision Tree 'Problem 1'

Choice Comparison for Node 'Decision'
80%

70%

60%

50%
PrecisionTree Course Version A
B
Penn State Great Valley
Probability

40%

30%

20%

10%

0%
10

12
-2

Chart Data
A B
Value Probability Value Probability
#1 4 73.0000% 0 55.0000%
#2 8 27.0000% 10 45.0000%
PrecisionTree Risk Profile - Statistical Summary
Performed By: DARAYI, MOHAMAD

Model: Decision Tree 'Problem 1' in [Week 2 Homework Suggested Solution.xlsx]Problem 1

Analysis: Choice Comparison for Node 'Decision' (D17)

Statistics A B
Mean 5.08 4.5
Minimum 4 0
Maximum 8 10
Mode 4 0
Std. Deviation 1.7758378304 4.974937185533
Skewness 1.0361 0.2010
Kurtosis 2.0736 1.0404
PrecisionTree RiskProfile - Cumulative Chart
Performed By: DARAYI, MOHAMAD

Model: Decision Tree 'Problem 1' in [Week 2 Homework Suggested Solution.xlsx]Problem 1

Analysis: Choice Comparison for Node 'Decision' (D17)

Cumulative Probabilities for Decision Tree 'Problem 1'

Choice Comparison for Node 'Decision'
100% Part (1): See the chart.

Part (2): There are two c

branch. Another one is t
80%
Part (3): It is because th
the possible decision pa
Cumulative Probability

60%
PrecisionTree Course Version A
B
Penn State Great Valley
40%

20%

0%
-2

10

12

Chart Data
A B
Value Probability Value Probability
#1 Infinity 0.0000% Infinity 0.0000%
#2 4 0.0000% 0 0.0000%
#3 4 73.0000% 0 55.0000%
#4 8 73.0000% 10 55.0000%
#5 8 100.0000% 10 100.0000%
#6 Infinity 100.0000% Infinity 100.0000%
Part (1): See the chart.

Part (2): There are two curves in the Cumulative Chart. One is the best decision strategy in the subtree A
branch. Another one is the strategy in the subtree B branch.

Part (3): It is because the PrecisionTree only displays the curve that is the best decision strategy among all
the possible decision paths for each alternative of the left-most decision node.
PrecisionTree RiskProfile - Cumulative Chart
Performed By: DARAYI, MOHAMAD

Model: Decision Tree 'Problem 1' in [Week 2 Homework Suggested Solution.xlsx]Problem 1

Analysis: Choice Comparison for Node 'Decision' (D17)

Cumulative Probabilities for Decision Tree 'Problem 2' Part (5): See th
Choice Comparison for Node 'Decision'
Part (6): There
100%

Part (7): Based

strategies; thus
strategy on the
80%
Cumulative Probability

C
60%
PrecisionTree Course Version A Part (5): See the chart.
P enn State Great Valley B
Part (6): There are thre
40%
Part (7): Based on the n
three decision strategie
the EV value of each de
20%
because the EV is the la

0%
-2

10

12

14

16
Chart Data
C A B
Value Probability Value Probability Value Probability
#1 Infinity 0.0000% Infinity 0.0000% Infinity 0.0000%
#2 4 0.0000% 0 0.0000% 0 0.0000%
#3 4 73.0000% 0 13.5000% 0 55.0000%
#4 8 73.0000% 4 13.5000% 10 55.0000%
#5 8 100.0000% 4 86.5000% 10 100.0000%
#6 Infinity 100.0000% 15 86.5000% Infinity 100.0000%
#7 15 100.0000%
#8 Infinity 100.0000%
 Part (5): See the chart.

Part (6): There are three curves in the Cumulative Chart.

Part (7): Based on the new Cumulative Chart, there is no stochastic dominance occurred among the three decision
strategies; thus, we need to base on the EV to make such the decision. According to the EV value of each decision
strategy on the new tree, the entire C subtree branch should be chosen because the EV is the largest.

Part (5): See the chart.

Part (6): There are three curves in the Cumulative Chart.

Part (7): Based on the new Cumulative Chart, there is no stochastic dominance occurred among the
three decision strategies; thus, we need to base on the EV to make such the decision. According to
the EV value of each decision strategy on the new tree, the entire C subtree branch should be chosen
because the EV is the largest.
e decision
h decision