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Optimization over a collection of decision trees with three-valued outcomes

Author

Listed:
  • Lonnie Turpin

    (McNeese State University)

  • Matiur Rahman

    (McNeese State University)

  • Alberto Marquez

    (Lamar University)

Abstract

This note considers decision trees with three-valued outcomes. The structure of the trees are represented in a familiar form, allowing for actions and states of nature where the states of nature are associated with objective probabilities. We discuss the partitioning of trees by path enumeration, and present a simple formula for calculating the probabilities of outcomes. Finally, we construct a linear programming model to optimize over the given probabilities to select the optimal partition tree representing the collection of actions that minimizes the potential for loss.

Suggested Citation

  • Lonnie Turpin & Matiur Rahman & Alberto Marquez, 2016. "Optimization over a collection of decision trees with three-valued outcomes," Economics Bulletin, AccessEcon, vol. 36(4), pages 1959-1965.
    • Handle: RePEc:ebl:ecbull:eb-16-00674
    as

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    References listed on IDEAS

    as
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    5. Kobberling, Veronika & Wakker, Peter P., 2005. "An index of loss aversion," Journal of Economic Theory, Elsevier, vol. 122(1), pages 119-131, May.
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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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