3.3.3 decision trees

decision trees

method of tracing outcomes of any decision allowing results to be compared to find the most profitable

data is based on

past data, experience and subjective estimates

decision tree pros

shows courses not previously considered, places a numerical value on decisions, good where a business is able to make accurate estimates of probabilities and benefits, forces management to take into account risks involved

decision tree cons

information is not exact, time lags often occur, decisions are not always concerned with probabilities and quantities, time consuming to make, don’t account for dynamics, can be limited