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Lonnie Turpin, Matiur Rahman and Alberto Marquez
''Optimization over a collection of decision trees with three-valued outcomes''
( 2016, Vol. 36 No.4 )
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.
JEL: C6 - Mathematical Methods and Programming: General
Manuscript Received : Oct 04 2016 Manuscript Accepted : Nov 09 2016

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