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Decision Tree Analysis Guide

Nick is a fourth year undergraduate student who has received a job offer from ABC consulting for PHP 250,000 per year. He has until May 1st to decide. His classmate Mary recommends him for a position at her firm that may offer PHP 300,000, but they won't decide until April 15th. Nick can also attend a job fair in mid-May where he is likely to get a consulting job but is uncertain of the pay. To help Nick decide, a decision tree will be constructed mapping out his options, assigning probabilities to events, evaluating the potential outcomes, and working backwards to determine the best decision. Constructing a decision tree involves identifying decision points and alternatives, uncertainties and potential outcomes, and estimating values like

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44 views9 pages

Decision Tree Analysis Guide

Nick is a fourth year undergraduate student who has received a job offer from ABC consulting for PHP 250,000 per year. He has until May 1st to decide. His classmate Mary recommends him for a position at her firm that may offer PHP 300,000, but they won't decide until April 15th. Nick can also attend a job fair in mid-May where he is likely to get a consulting job but is uncertain of the pay. To help Nick decide, a decision tree will be constructed mapping out his options, assigning probabilities to events, evaluating the potential outcomes, and working backwards to determine the best decision. Constructing a decision tree involves identifying decision points and alternatives, uncertainties and potential outcomes, and estimating values like

Uploaded by

Mahja Lin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Decision Tree

MAHJALIN R. BALDESCO
-REPORTER-
Learning Outcomes
To Define Decision Tree

To know the relevance of it to one's work


or field
To know when to apply the Decision
Tree through workshops
Decision Tree
A tool for analyzing the choices, risks, objectives, monetary
gains, and information needs involved in complex
management decisions, like plant investment.

-John F. Magee
Decision Problem:

It is April 10th, and Nick is currently a fourth year undergraduate in Management Science
at Aowa University . He has decided to seek out a job as a consultant. He already has
received an offer from ABC consulting for Php 250,000 per year. He has until May 1st to
decide whether to accept the offer. An old classmate of his, Mary Kumar, has told him
that she has recommended him highly to her consulting firm, and feels that there is an
excellent chance that they would give him an offer for Php 300,000. However, they are
not prepared to make any decision until April 15th. If they made him an offer, he would
need to decide by May 1. He also has the option of taking part in the consulting job fair
in the middle of May. He is fairly certain that he could get a consulting job at that time,
but is uncertain as to what he would be paid.
STEP 1: MAP OUT NICKS' DECISION PROBLEM

STEP 2: ASSIGN PROBABILITIES TO EVENTS

STEP 3: EVALUATE THE END NODES

STEP 4: WORK BACKWARDS AND EVALUATE


As requirements of making a decision tree, management must:

• Identify the points of decision and alternatives available at each point.


• Identify the points of uncertainty and the type or range of alternative
outcomes at each point.
• Estimate the values needed to make the analysis, especially the
probabilities of different events or results of action and the costs and
gains of various events and actions.
• Analyze the alternative values to choose a course.
How to Construct
a Decision Tree
References:
Decision Trees for Decision-Making ([Link])

Using a Decision Tree | Principles of Management ([Link])

[Link]
Box393189B-PUBLIC-PUBDATE-8-19-15-DOI-10-1596-978-1-4648-0477-9-EPI-
[Link]

Decision trees 1 ([Link])

Microsoft Word - decan_20071029_1042.doc ([Link])


THANK YOU

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