Decision Trees

Question 1

What is a Decision Tree?

Answer 1

A form of dynamic programming that shows possible courses of action and their outcomes.

Question 2

What is the first stage of analysing a Decision Tree?

Answer 2

Assign a cash value to each possible outcome

Question 3

What is the second stage of analysing a Decision Tree?

Answer 3

Estimate the worth of the possible outcomes

Question 4

What is the third stage of analysing a Decision Tree?

Answer 4

Estimate the probability of each outcome at each Chance Node

Question 5

Which way should a Decision Tree be analysed?

Answer 5

Right to left, from the outcome to the decision

Question 6

How do you calculate a Benefit Value?

Answer 6

Subtract the Option Cost from the Outcome Value

Question 7

How is the value of a Decision Node decided?

Answer 7

It is the Decision Benefit with the highest value

Question 8

How are Decision Trees beneficial?

Answer 8

• Data is clearly laid out
• Values are easily quantified
• Previous information may be used

Question 9

Why may Decision Trees not be beneficial?

Answer 9

• Probabilities are usually estimates
• They ignore qualitative aspects to data
• Data is prone to bias
• Does not necessarily reduce risk