272 3000 FIGURE I - The representation of Problem 4 as a decision tree (standard formulation). FIGURE 2. -The representation of Problem 10 as a decision tree(sequential formulation). outcomes. Specifically, the event 'not winning 3, 000is included in the event ' not winning 4,000in the sequential formulation, while the two events are indepen ent in the standard formulation. Thus, the outcome of winning 3, 000 has a rtainty advantage in the sequential formulation, which it does not have in the standard formulation significant because it violates the basic supposition of a decision-theoretical of final states. It is easy to think of decision problems that are most naturally represented in one of the forms above rather than in the other. For example, the choice between two different risky ventures is likely to be viewed in the standard form. On the ther hand, the following problem is most likely to be represented in the sequential form. One may invest money in a venture with some probability of losing one's capital if the venture fails, and with a choice between a fixed agreed eturn and a percentage of earnings if it succeeds. The isolation effect implies that he contingent certainty of the fixed return enhances the attractiveness of this option, relative to a risky venture with the same probabilities and outcomes Reproduced with perm ission of the copyright owner. Further reproduction prohibited without permission.Reproduced with permission of the copyright owner. Further reproduction prohibited without permission