Thanks to the help menu, I understand how to use each button and create a decision tree. I'd appreciate any further description on how to use "value-measure", and U-Value.
Thanks
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The Value Measure is the gain or loss associated with each potential outcome. Money is usually used as the unit but it doesn't have to be. Assuming money is the unit, you label each potential outcome with how much money you will gain (positive) or loose (negative).
Example decision: Do I buy the lottery ticket?
For the branch resulting in me deciding not to buy, I have a gain and lose of $0. (I spent nothing and gained nothing)
For the branch where I buy it and don't win, the gain/lose is -$1 (because I spent $1 on the ticket).
For the branch where I buy it and win, the gain/lose is +$7,999,999 for a $8M prize (because I spent $1 on the ticket).
The U in U-Value stands for Utility. The values in the U-Value column are calculated from the Value Measure using the Utility Curve. The Utility Curve attempts to describe user specific preferences based on risk tolerance. You can search "Utility Theory" on line to get a better understanding. By default the program is set to use a risk neutral Utility Curve, essentially not incorporating Utility Theory in the analysis. If you wish to use U-Value, you need to provide the Utility Curve by providing gamma.
You should not modify the U-Value column as it is used by the program to get Expected Value (or Expected Utility).
If you would like to refer to this comment somewhere else in this project, copy and paste the following link:
This software seems very useful. Is there a document which explains how to use it?
Thanks
Thanks to the help menu, I understand how to use each button and create a decision tree. I'd appreciate any further description on how to use "value-measure", and U-Value.
Thanks
The Value Measure is the gain or loss associated with each potential outcome. Money is usually used as the unit but it doesn't have to be. Assuming money is the unit, you label each potential outcome with how much money you will gain (positive) or loose (negative).
Example decision: Do I buy the lottery ticket?
For the branch resulting in me deciding not to buy, I have a gain and lose of $0. (I spent nothing and gained nothing)
For the branch where I buy it and don't win, the gain/lose is -$1 (because I spent $1 on the ticket).
For the branch where I buy it and win, the gain/lose is +$7,999,999 for a $8M prize (because I spent $1 on the ticket).
The U in U-Value stands for Utility. The values in the U-Value column are calculated from the Value Measure using the Utility Curve. The Utility Curve attempts to describe user specific preferences based on risk tolerance. You can search "Utility Theory" on line to get a better understanding. By default the program is set to use a risk neutral Utility Curve, essentially not incorporating Utility Theory in the analysis. If you wish to use U-Value, you need to provide the Utility Curve by providing gamma.
You should not modify the U-Value column as it is used by the program to get Expected Value (or Expected Utility).
The linked page has a couple images to better explain the way to use U-Value and get the U-Value column to populate.
https://sites.google.com/site/ihavetwochildren/home/simple-decision-tree
Let me know if you have any further questions.