Sensitivity analysis on a chance node with more than two branches.

Sensitivity analysis is an essential part of decision analysis. The literature on medical decision analysis suggests the use of two-branch chance nodes in decision trees to avoid logical inconsistencies during sensitivity analysis. The authors show that the two-branch decomposition is not appropriate for sensitivity analysis when multiple outcomes from a single state cannot be disentangled into a sensible sequence of events. They recommend retaining the natural structure of the tree and propose two sensitivity-analysis methods for use on chance nodes with three or more branches.

Duke Scholars

Author Robert T. Clemen Fuqua School of Business