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Covariance Structure Models and Influence Diagrams

Author

Listed:
  • William J. Burns

    (University of Iowa, Iowa City, Iowa 52242)

  • Robert T. Clemen

    (University of Oregon, Eugene, Oregon 97403)

Abstract

Statisticians use covariance structure modeling as a versatile tool for modeling and testing theory. The models that result provide explicit and detailed descriptions of stochastic systems. We show how covariance structure models are related---mathematically, conceptually, philosophically and practically---to Gaussian influence diagrams as described by Shachter and Kenley (1989). This relationship suggests ways in which covariance structure modeling can be used to advantage in the prescriptive domain of decision analysis. The paper includes an example concerning the management of hazardous materials, in which a covariance structure model is converted to an influence diagram for use in a prescriptive analysis.

Suggested Citation

  • William J. Burns & Robert T. Clemen, 1993. "Covariance Structure Models and Influence Diagrams," Management Science, INFORMS, vol. 39(7), pages 816-834, July.
    • Handle: RePEc:inm:ormnsc:v:39:y:1993:i:7:p:816-834
    DOI: 10.1287/mnsc.39.7.816
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    Cited by:

    1. Baruch Fischhoff, 1995. "Risk Perception and Communication Unplugged: Twenty Years of Process," Risk Analysis, John Wiley & Sons, vol. 15(2), pages 137-145, April.
    2. Renee M. Clark & Mary E. Besterfield‐Sacre, 2009. "A New Approach to Hazardous Materials Transportation Risk Analysis: Decision Modeling to Identify Critical Variables," Risk Analysis, John Wiley & Sons, vol. 29(3), pages 344-354, March.
    3. Baruch Fischhoff & Wändi Bruin & Ümit Güvenç & Denise Caruso & Larry Brilliant, 2006. "Analyzing disaster risks and plans: An avian flu example," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 131-149, September.
    4. Bert, Federico E. & Satorre, Emilio H. & Toranzo, Fernando Ruiz & Podesta, Guillermo P., 2006. "Climatic information and decision-making in maize crop production systems of the Argentinean Pampas," Agricultural Systems, Elsevier, vol. 88(2-3), pages 180-204, June.
    5. Wändi Bruine de Bruin & Paul S. Fischbeck & Neil A. Stiber & Baruch Fischhoff, 2002. "What Number is “Fifty‐Fifty”?: Redistributing Excessive 50% Responses in Elicited Probabilities," Risk Analysis, John Wiley & Sons, vol. 22(4), pages 713-723, August.

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