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Decision tree
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Key Concepts:
Terms in this set (15)
What dose a decision tree help to do?
decide whether the net gain from a decision is worth while
What dose a decision tree use?
- Estimates
- Probability
What is a decision tree?
mathematical model used to help managers make decisions
Cost
...
Probability
...
$
...
expected value (EV)
...
Total expected value (TEV)
...
Net gain
...
Success
...
Failure
...
Advantages of a decision tree?
- Set out logically
- Risk addressed
- Likely costs considered / potential benefits
Disadvantages of a decision tree?
- Just an estimate
- Quantitive data only
- Bias
How do you work out TEV (total expected value)?
Profit + loss
How do you work out NET?
TEV - cost
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