HERESY IN DECISION ANALYSIS: MODELING SUBSEQUENT ACTS WITHOUT ROLLBACK *

In: Decision sciences, Band 9, Heft 4, S. 543-554

Abstract

AbstractWhen making a current decision, like choosing an experiment, a subject will often take into account "subsequent acts" which he does not yet commit to. Common practice requires modeling through preposterior analysis, which treats one act as certain, conditional on the intervening information modeled. This is not logically necessary since the same expected utilities could be obtained by properly conditioning utility on any selection of events (including subsequent acts). The subject could assess utility marginal on subsequent acts or conditional on subsequent acts treated as uncertain events. The preposterior model is a special case of the latter where conditioning information is sufficiently modeled to imply subsequent act probabilities of zero or one. This paper argues that attempts at preposterior modeling are often unsuccessful and have critically flawed much current practice in decision analysis. Simpler approaches such as the "acts‐as‐events" model are intrinsically less dependent on restrictive assumptions and have been successfully applied to many real‐world decisions.