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Decision Tree Final

The document presents two exercises analyzing decision making using decision trees. Exercise 1 analyzes three alternatives under maximax and maximin criteria. It determines that alternative A1 is best under maximax and A3 under maximin. Exercise 2 analyzes two alternatives under maximax, maximin, maximum likelihood, and Bayes decision rule criteria. It determines that alternative A2 is best under all criteria. It also presents a decision tree for the exercise. Exercise 3 presents a production decision problem and analyzes the outcomes and probabilities of doing a market research with a contingency table. It determines the decision maker should do the market research and produce if the outcome is favorable, otherwise not produce.

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Muhammad Apriandito
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134 views6 pages

Decision Tree Final

The document presents two exercises analyzing decision making using decision trees. Exercise 1 analyzes three alternatives under maximax and maximin criteria. It determines that alternative A1 is best under maximax and A3 under maximin. Exercise 2 analyzes two alternatives under maximax, maximin, maximum likelihood, and Bayes decision rule criteria. It determines that alternative A2 is best under all criteria. It also presents a decision tree for the exercise. Exercise 3 presents a production decision problem and analyzes the outcomes and probabilities of doing a market research with a contingency table. It determines the decision maker should do the market research and produce if the outcome is favorable, otherwise not produce.

Uploaded by

Muhammad Apriandito
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Syndicate 9: Decision Tree Case

- Muhammad Apriandito (29119004)


- Ghina Athaya (29119159)
- Yegi Esarianita (29119139)
- Siti Nuur Fatinah M (29119073)
- Surrendra Singh (Exchange student)

Exercise 1

Alternative State of Nature Maximax Maximin

State 1 State 2 State 3

A1 4 2 8 8 2

A2 3 1 3 3 1

A3 4 6 5 6 4

A. Under Maximax : Select A1


B. Under Maximin: Select A3

Exercise 2

Alternative State of Nature Maximax Maximin

State 1 State 2 State 3

A1 150 110 170 170 110

A2 180 200 220 220 180

Prior Probability 0,1 0,3 0,6


A. The alternative that should be chosen under the maximax criterion = A2 (220)
B. The alternative that should be chosen under the maximin criterion = A2 (180)
C. The alternative that should be chosen under maximum likelihood criterion
Probability maximum = State 3 (0,6)
Alternatif maximum = A2 (220)
So under maximum likelihood criterion = A2 (220)
D. The alternative that should be chosen under Bayes decision rule
𝐸𝑉(𝐴1) = (0,1 𝑥 150) + (0,3 𝑥 110) + (0,6 𝑥 170) = 150
𝐸𝑉(𝐴2) = (0,1 𝑥 180) + (0,3 𝑥 200) + (0,6 𝑥 220) =210
So, The alternative that should be chosen under bayes decision rule = A2
E. Decision tree
Exercise 3

Production cost = USD 90,000


Revenue = USD 500,000, if he didn’t decide to produce then the company would loss nothing.
P(Accept) = 0.2 ; P(Reject) = 0.8
Market Research cost = USD 10,000

P (FSS | Accept) = 0.6 ; P(USS | Accept) = 0.4


P(FSS | Reject) = 0.1 ; P(USS | Reject) = 0.9

How if Budi decided to do marketing research?

Answer:

Based on the analysis, Budi should go for market research and if the outcome is favorable then
Budi should do the production, otherwise he shouldn’t produce. If Budi decide not to do the
market research, he should do the production. Here the detail:

𝑃(𝐹𝑆𝑆 ∩ 𝐴𝑐𝑐𝑒𝑝𝑡)
- P (FSS | Accept) = 𝑃 (𝐴𝑐𝑐𝑒𝑝𝑡)
P (FSS ∩ Accept) = P (FSS | Accept) x P (Accept) = 0.6 x 0.2 = 0.12
𝑃(𝐹𝑆𝑆 ∩ 𝑅𝑒𝑗𝑒𝑐𝑡)
- P (FSS | Reject) = 𝑃 (𝑅𝑒𝑗𝑒𝑐𝑡)
P (FSS ∩ Reject) = P (FSS | Reject) x P (Reject) = 0.1 x 0.8 = 0.08
- P (FSS) = P (FSS ∩ Accept) + P (FSS ∩ Reject) = 0.12 + 0.08 = 0.2
𝑃(𝐴𝑐𝑐𝑒𝑝𝑡 ∩ 𝐹𝑆𝑆) 0.12
- P (Accept | FSS) = = = 0.6
𝑃 (𝐹𝑆𝑆) 0.2
- P (Reject | FSS) = 1 - P (Accept | FSS) = 1 - 0.6 = 0.4

𝑃(𝑈𝑆𝑆 ∩ 𝐴𝑐𝑐𝑒𝑝𝑡)
- P (USS) | Accept) =
𝑃 (𝐴𝑐𝑐𝑒𝑝𝑡)
P (USS ∩ Accept) = P (USS | Accept) x P (Accept) = 0.4 x 0.2 = 0.08
𝑃(𝑈𝑆𝑆 ∩ 𝑅𝑒𝑗𝑒𝑐𝑡)
- P (USS | Reject) = 𝑃 (𝑅𝑒𝑗𝑒𝑐𝑡)
P (USS ∩ Reject) = P (USS | Reject) x P (Reject) = 0.9 x 0.8 = 0.72
- P (USS) = P (USS ∩ Accept) + P (USS ∩ Reject) = 0.08 + 0.72 = 0.8
𝑃(𝐴𝑐𝑐𝑒𝑝𝑡 ∩ 𝑈𝑆𝑆) 0.08
- P (Accept | USS) = = = 0.1
𝑃 (𝑈𝑆𝑆) 0.8
- P (Reject | USS) = 1 - P (Accept | USS) = 1 - 0.1 = 0.9
Contingency Table:

FSS USS p

Accept 0.12 0.08 0.2

Reject 0.08 0.72 0.8

0.2 0.8 1

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