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Decision Tree

A decision tree is a tool used to help make decisions by considering all possible solutions and outcomes in a branching tree structure. It consists of decision nodes, chance nodes, and end nodes. The document provides an example of using a decision tree to analyze the options for a marketing executive deciding whether to leave his current job. It then lists the advantages of decision trees in clearly laying out problems and analyzing consequences and probabilities to make the best decision based on available information. Disadvantages include needing quantitative skills and adequate information to complete the analysis accurately without too much or too little information.

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janhavijsh
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80 views

Decision Tree

A decision tree is a tool used to help make decisions by considering all possible solutions and outcomes in a branching tree structure. It consists of decision nodes, chance nodes, and end nodes. The document provides an example of using a decision tree to analyze the options for a marketing executive deciding whether to leave his current job. It then lists the advantages of decision trees in clearly laying out problems and analyzing consequences and probabilities to make the best decision based on available information. Disadvantages include needing quantitative skills and adequate information to complete the analysis accurately without too much or too little information.

Uploaded by

janhavijsh
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Decision tree analysis

• What is a Decision Tree??


• A Decision Tree is a thinking tool you use to
help yourself or a group make a decision by
considering all of the possible solutions and
their outcomes
• It looks like a tree on its side, with the branches
spreading to the right. Each branch is a possible
solution with its outcomes branching out from
it
Components of Decision Tree
A decision Tree consists of 3 types of nodes:-
1. Decision nodes - commonly represented by
squares
2. Chance nodes - represented by circles
3. End nodes - represented by triangles
A decision tree analysis for simple decision to be taken by Mr. John a
Marketing Executive working for ABC corp. who is contemplating leaving
his current job and looking at other possible options
Analysis
Evaluating Mr. John’s options using probability.
Simple Example
• A purchased computer will cost $2000, but the
probability that it will have all the software you
require is only 40%. 2000 times .4 is 800.
• A custom computer will cost $3000, but the
probability it will have your software is 100%.
3000 times 1 is 3000.
• Because 3000 is higher than 800, the custom
computer will meet your needs better than one
purchased at a store.
Is the Decision tree bearing the fruits?

Advantages Disadvantages
• Clearly lay out the problem so that • Require a certain knowledge of
all options can be challenged. quantitative or statistical experience to
complete the process accurately.
• Allow us to analyze the possible
• Requires adequate information to be
consequences of a decision fully.
completed. Too much information
• Provide a framework to quantify (paralysis of analysis," where these
the values of outcomes and the individuals face too much information
probabilities of achieving them. when making a decision) or too less
• Help us to make the best decisions information leads to incomplete
analysis.
on the basis of existing information
• Decision trees can require more
and best guesses.
analysis than other analysis methods
and slow down the decision-making
process.

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