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Hi sir
can u please help me on the technical article on decision tress how was the joint probabilitys calculated for the perfect information…
thank u
Let me explain just one of them (the others follow the same logic).
There is a 70% chance that the the launch will be successful, or to put in another way it will be successful 7 time out of 10.
However, even if it is successful, there is only a 0.2 probability that demand will be high. So… out of the 7 time out of 10 that it is successful, the only on 0.2 of those occasions (i.e. 0.2 x 7 = 1.4) will it be successful and high
So out every 10 times, only on 1.4 times will it be successful and high. 1.4 out of 10 is the same as a 14% chance.
(However, do note that the person who wrote the article does say that it is simpler just to do the tree the first way he does, in which case you do not need the joint probabilities.)
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