Decision analysis by augmented probability simulation

Decision analysis by augmented probability simulation

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Article ID: iaor20002587
Country: United States
Volume: 45
Issue: 7
Start Page Number: 995
End Page Number: 1007
Publication Date: Jul 1999
Journal: Management Science
Authors: , ,
Keywords: markov processes, simulation: applications
Abstract:

We provide a generic Monte Carlo method to find the alternative of maximum expected utility in a decision analysis. We define an artificial distribution on the product space of alternatives and states, and show that the optimal alternative is the mode of the implied marginal distribution on the alternatives. After drawing a sample from the artificial distribution, we may use exploratory data analysis tools to approximately identify the optimal alternative. We illustrate our method for some important types of influence diagrams.

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