Should I go to college?
An example of a single-person decision
A high school graduate after leaving school has to decide whether to go to
college. If the choice is ``not to go to college,'' then should she go to a
technical school to learn a trade or should she start to work? The consequences
in terms of lifetime earnings will be different in the two cases. If, however,
the decision is to go to college then after graduation (provided she
graduates), she has to decide whether to earn a professional degree, to go to
graduate school or to enter the labor market and find a job. Notice that each
decision involves different costs and benefits. The sequential decision
problem that we have just outlined can be represented by a
decision tree. In the figure we have written down the payoffs for a
hypothetical high school graduate.
The payoffs for different decisions will be
different across high school graduates and as a result we will see a variety
of decisions none of which can be summarily dismissed as irrational.
The problem that is now a central issue in the decision process is to choose an
optimal decision path. An optimal decision path is---as its name suggests---a
decision path that leads the decision maker to a terminal node with the
``best'' possible payoff. If we deal with a decision tree, then there is
usually one optimal decision path---unless there are two or more terminal
nodes with the same best possible payoff. It is not difficult to see that
A to B1 C3 is the optimal decision path for the high school graduate.
Back to Games and Decision Making Home Page
