Decision Tree Assignment

•    A clinic decides to adopt an EHR system. The Chief Information Officer (CIO) must decide whether to take “big bang” approach (purchase the whole system) or take a pilot project first.

•    The net benefits (or costs) the system generates to the clinic depend upon whether the system works well, partially well or not well. The probabilities of the system working well, partially well and not well are 0.3, 0.6 and 0.1 respectively.

•    If the clinic takes “big bang” approach, the net benefits (or costs) are $100,000 (well), $10,000 (partially well) or -300,000 (not well).

•    In a pilot project, there are two outcomes:  project goes well, or does not go well, with the probabilities as 0.6 and 0.4, respectively.  After the project, the CIO will move on.  If the pilot project works well, he can take a full scale project. The probability of working well ($100,000 outcome) in the full scale project it is 0.7, and the probability of partially working ($10,000) in the full scale project is 0.3.  If the pilot project does not work well, the CIO will give it up. In a give-up event, the clinic will lose $100,000.

Make a decision whether the office should take “big bang” or “pilot project”, with a decision tree.  Use Microsoft Word or PowerPoint to draw your diagram.  Also show the calculations for “E”, similar to how it was done in the lecture notes.

Submit your assignment via this assignment’s link in TRACS.  Please do not forget to write your name on your assignment submission.

Please note that this is an individual assignment, NOT a team assignment.  Plagiarism will NOT be tolerated.