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ON THE SELECTION OF CRITICAL VALUES IN SEQUENTIAL DECISION PROBLEMS
Author(s) -
Pappas James L.,
Wichern Dean W.
Publication year - 1977
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1977.tb01091.x
Subject(s) - selection (genetic algorithm) , variance (accounting) , context (archaeology) , simple (philosophy) , computer science , distribution (mathematics) , mathematical economics , mathematical optimization , econometrics , mathematics , economics , artificial intelligence , paleontology , mathematical analysis , philosophy , accounting , epistemology , biology
This paper explores the effect which the choice of critical values in sequential decisions has on the overall distribution of payoffs. It demonstrates in the context of a simple two‐stage sequential decision model that the mean and variance of the overall distribution can be highly sensitive to the choice of critical values. Finally, it considers the problem of selecting optimal critical values when a standard meanvariance approach is used.