51.7 Constructing an influence diagram - adding outcomes and alternatives

Although the influence diagram may appear to be complete, outcomes and alternatives must be added before it can be converted to a decision tree.

• Alternatives represent the choices available to the decision maker at a decision node.

• Outcomes represent the possible events that can occur from a chance node.

In our model the alternatives (choices) available to the Decision maker are: Risky Investment or CD paying 5%.

The possible outcomes (events) from the chance node are: Large increase, Small increase or Large decrease.

Lets see how we add these now.

To add alternatives to the decision node:

• Right-click on the decision node.

• Choose Alternatives from the context menu.

• Click "Add..." to create an alternative and enter label text. In this example add the following alternatives:

  • Risky investment

  • CD paying 5%

• Click OK.

For this influence diagram, the alternatives should look like the figure below before you select "OK".

To add outcomes to a chance node:

• Right click on the chance node.

• Choose Outcomes from the context menu.

• Click Add to create an outcome and enter label text. In this example add the following Outcomes:

  • Large increase

  • Small increase

  • Large decrease

• Repeat the last step to add additional outcomes.

For this influence diagram, the outcomes should look like below before you select "OK".

Now the outcomes and alternatives are added, you can now proceed to edit the options in the Influence Diagram before you convert to a decision tree.