Probabilistic Sensitivity Analysis for Decision Trees with Multiple Branches: Use of the Dirichlet Distribution in a Bayesian Framework

Andrew H. Briggs, A. E. Ades and Martin J. Price

Medical Decision Making, 2003, vol. 23, issue 4, 341-350

Abstract: In structuring decision models of medical interventions, it is commonly recommended that only 2 branches be used for each chance node to avoid logical inconsistencies that can arise during sensitivity analyses if the branching probabilities do not sum to 1. However, information may be naturally available in an unconditional form, and structuring a tree in conditional form may complicate rather than simplify the sensitivity analysis of the unconditional probabilities. Cur- rent guidance emphasizes using probabilistic sensitivity analysis, and a method is required to provide probabilistic probabilities over multiple branches that appropriately rep- resents uncertainty while satisfying the requirement that mutually exclusive event probabilities should sum to 1. The authors argue that the Dirichlet distribution, the multivariate equivalent of the beta distribution, is appropriate for this purpose and illustrate its use for generating a fully probabilistic transition matrix for a Markov model. Furthermore, they demonstrate that by adopting a Bayesian approach, the problem of observing zero counts for transitions of interest can be overcome.

Date: 2003
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:medema:v:23:y:2003:i:4:p:341-350

DOI: 10.1177/0272989X03255922

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