Multistage Monte Carlo Method for Solving Influence Diagrams Using Local Computation

John M. Charnes () and Prakash P. Shenoy ()
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John M. Charnes: School of Business, University of Kansas, 1300 Sunnyside Avenue, Summerfield Hall, Lawrence, Kansas 66045-7585
Prakash P. Shenoy: School of Business, University of Kansas, 1300 Sunnyside Avenue, Summerfield Hall, Lawrence, Kansas 66045-7585

Management Science, 2004, vol. 50, issue 3, 405-418

Abstract: The main goal of this paper is to describe a new multistage Monte Carlo (MMC) simulation method for solving influence diagrams using local computation. Global methods have been proposed by others that sample from the joint probability distribution of all the variables in the influence diagram. However, for influence diagrams having many variables, the state space of all variables grows exponentially, and the sample sizes required for good estimates may be too large to be practical. In this paper, we develop a MMC method, which samples only a small set of chance variables for each decision node in the influence diagram. MMC is akin to methods developed for exact solution of influence diagrams in that we limit the number of chance variables sampled at any time. Because influence diagrams model each chance variable with a conditional probability distribution, the MMC method lends itself well to influence diagram representations.

Keywords: decision analysis; approximations; sequential; simulation; applications; Monte Carlo methods; local computation (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:50:y:2004:i:3:p:405-418

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