Decision Tree Analysis (Simple)

(A good tool to decide when you are uncertain about the outcomes)

Decision Tree

Decision Tree analysis is a tool that helps you choose the best alternative when you are uncertain about the outcome you will get.

Simple decision tree analysis is useful when you have one decision (with many alternatives) and one or more uncertainties.

Steps for Decision Tree Analysis (Simple)

  1. Select the alternatives you wish to analyze

  2. Determine whether you will use money to represent the outcomes or not.

  3. Select the important uncertainties that can affect your decision.

  4. Rank the outcomes from best to worst

  5. Assign an indifference probability weight for each outcome

  6. Determine how likely each outcome will occur

  7. Rate each alternative based on how well it achieves the outcomes you like and their probability of occurring.

Results of the Analysis

Decision Tree analysis will rank the alternatives for you, even if you are uncertain about the outcome. They will tell you which alternative is best, and will assign a score to each alternative.