660 likes | 1.89k Views
Old Exam Decision Tree Decision: Should Bill settle lawsuit with Paula? Actions: settle or trial? Objective: Maximize number of Democrats in Senate in 1999 If he settles, 40 Dems Probabilities If trial, Probability that judge allows testimony from state troopers = .1
E N D
Decision: Should Bill settle lawsuit with Paula? • Actions: settle or trial? • Objective: Maximize number of Democrats in Senate in 1999 • If he settles, 40 Dems
Probabilities • If trial, Probability that judge allows testimony from state troopers = .1 • Conditional probability = P(A|T)=.1
If testimony, he either wins or loses • If he wins, 60 Democrats • If he loses, 30 Democrats
Same outcomes if no testimony But different probabilities
Conditional probability that he loses • P(lose|testimony) = .6 • P(lose|no testimony) = .3
40 settle 30 .6 lose 60 win testimony trial 30 .1 lose .3 60 No testimony win 60
Note we do E(x) from right to left Draw tree from left Find optimal decision from right
40 settle 30 lose 42 60 win testimony trial 30 lose 51 60 No testimony win 60
40 settle 30 lose 42 60 win testimony trial 30 lose 51 50.1 60 No testimony win 60
40 settle 30 lose 42 60 50.1 win testimony trial 30 lose 51 50.1 60 No testimony win 60
Exam Format • Max E(x) = 50.1 • Interpretation: Bill should go to trial
Post-exam Update • New Objective: Maximize number of electoral votes for Al Gore in 2000 • If Bill had settled case, scandal would have been forgotten by Nov 2000 • Gore might have won his home state of Tenn (and Arkansas?) if no impeachment trial
Unethical Decision Trees • Ford used decision tree to decide NOT to recall Pinto after gas tanks exploded • Firestone used decision tree to decide NOT to recall tires after SUV rollovers • Pop Culture: Ed Norton’s character describes calculation of E(x) for recall decision in film “Fight Club” • Pop Culture: Miguel Ferrer’s character explains decision to smuggle drugs across border in film “Traffic”
Another Old Exam Problem Two-stage decision
Should David sign contract to do X-Files 2001-02? • Objective: maximize expected monetary value (all numbers in millions of dollars) • If he signs, he earns $3 • If cancelled after 2002, no further income • If not cancelled, a second decision in 2002: decide between another year on TV for another $3, or an X-Files movie • If movie does well, an additional $15, otherwise an additional $ 1
If he does NOT sign contract, • He does comedy movies • If they do well, he earns $ 10 • If they do not do well, he earns $ 2
Probabilities • P(X-Files cancelled) = .4 • P(X-Files movie does well) = .2 • P(Comedy movies do well) = .3
3 cancel .4 3+3=6 Another yr Not cancel 3+15=18 sign movie well .2 3+1=4 Not well 10 Don’t sign Comedies do well .3 2 Not well
3 cancel .4 3+3=6 Another yr Not cancel 3+15=18 sign movie well .2 6.8 3+1=4 Not well 10 Don’t sign Comedies do well .3 2 Not well
3 cancel .4 3+3=6 Another yr Not cancel 6.8 3+15=18 sign movie well .2 6.8 3+1=4 Not well 10 Don’t sign Comedies do well .3 2 Not well
3 cancel .4 5.28 3+3=6 Another yr Not cancel 6.8 3+15=18 sign movie well .2 6.8 3+1=4 Not well 10 Don’t sign Comedies do well .3 2 Not well
3 cancel .4 5.28 3+3=6 Another yr Not cancel 6.8 3+15=18 sign movie well .2 6.8 3+1=4 Not well 10 Don’t sign Comedies do well 4.4 .3 2 Not well
3 cancel .4 5.28 3+3=6 Another yr Not cancel 6.8 3+15=18 sign movie well .2 6.8 5.28 3+1=4 Not well 10 Don’t sign Comedies do well 4.4 .3 2 Not well
Exam Format • Max E(x) = 5.28 • Interpretation: He should sign the contract. If not cancelled, he should do the X-files movie.
Post-exam update • Film “evolution” grossed $37 million
Decision Tree: MINIMIZE Cost Managed Health Care Example
Decision Maker: HMO physician • MD must decide whether or not to run test to determine if patient has disease
If MD runs test • Cost of test = $ 1000 • If test is positive, assume patient wants treatment, which costs $ 10,000 • On tree, write in thousands of dollars • Test = 1 • Treatment = 10
If MD does not run test • If patient had disease, was diagnosed too late, and died, survivors win lawsuit, and HMO pays out $ 1,000,000 • Tree: 1000
Probabilities • P(test positive) = .01 • P(patient dies|test positive but no treatment) = .05 • P(patient ok|test positive but no treatment) = .95 • This problem assumes only 2 outcomes: dead or ok. In real life, several branches.
10+1 = 11 positive .01 1 Run test negative 1000 die .05 .95 Do not run test positive 0 ok .01 0 negative
10+1 = 11 positive .01 1.1 1 Run test negative 1000 die .05 .95 Do not run test positive 0 ok .01 0 negative
E(x) if do not run test, but patient would have tested positive
10+1 = 11 positive .01 1.1 1 Run test negative 1000 die 50 .05 .95 Do not run test positive 0 ok .01 0 negative
10+1 = 11 positive .01 1.1 1 Run test negative 1000 die 50 .05 .95 Do not run test positive 0 ok .01 .5 0 negative
10+1 = 11 positive .01 1.1 1 Run test negative 1000 die 0.5 50 .05 .95 Do not run test positive 0 ok .01 .5 0 negative
Exam Format • Min E(x) = 0.5 from tree • Interpretation: MD should not run test, for expected cost of $ 500