Probabilistic Methods for Financial and Marketing Informatics

Chapter 5

Decision Analysis Fundamentals

In general, the information obtained by doing inference in a Bayesian network can be used to arrive at a decision, even though the Bayesian network itself does not recommend a decision. In this chapter, we extend the structure of a Bayesian network so that the network actually does recommend a decision. Such a network is called an influence diagram. Section 5.1 introduces decision trees, which are mathematically equivalent to influence diagrams, but which have difficulty representing large instances because their size grows exponentially with the number of variables. In Section 5.2 we discuss influence ...