| Abstract: | This paper describes a new mathematical programming approach to sequential decision problems that have an underlying decision tree structure. The approach, based upon a characterization of strategies as extreme points of a 0–1 polytope called the ‘decision tree polytope’, is particularly suited to the direct examination of risk-return and other tradeoffs amongst strategies. However, it can also be used for conventional utility maximization if a utility function is available. Further, the approach requires no algorithmic development—it can be implemented using commercially available algebraic modeling software and can solve large problems. A related, and already known, approach can be used for some more general Markov decision problems. © 1998 John Wiley & Sons, Ltd. |
