Decision Trees (3.3.3)

Question 1

What are decision trees?

Answer 1

A decision-making model using estimates and probabilities. Helps managers out if the net gain from a decision is worth it.

Question 2

What are the characteristics of decision trees?

Answer 2

-Choices are set out in a logical way
-Potential options considered alongside each other
-Use of Probabilities displays risk
-Costs and Benefits considered
-Easy to understand

Question 3

What are the disadvantages of decision trees?

Answer 3

-Estimates are prone to error
-Quantitative data ignoring Qualitative aspects
-Setting probabilities prone to bias
-Risk is not reduced

Question 4

What does a decision tree look like?

Answer 4

Look at powerpoint