Decision Trees And Sub Sequential Decisions
A decision tree is a graphic diagram of different decision alternatives and the sequence of events like if they were branches of a tree.
- The symbol Circle and Rectangle shows the decision point and the situation of uncertainty or event respectively. The node depicted by a square is a decision node when outcome nodes are depicted by a circle.
- Decision nodes: points whereas choices exist between managerial and alternatives decisions are made based on estimates and calculations of the returns expected.
- Outcome nodes are points whereas the events depend on probabilities
Demonstration of a tree diagram
For illustration 111 represents the payoff of the act event combination A1 - E1 - B1
When probabilities of different events are known they are written along the corresponding branches. Joint probabilities are acquired by multiplying the probabilities along the branches