Steps making DecisionTree

A decision tree is a graphical representation of decision process indicating decision alternatives, states of nature, related probabilities and conditional pay-offs for each combination of decision alternatives and states of nature. It shows all the possible choices that can be made as branches on the tree. And all the probable outputs for each selection as subsidiary branches on the tree.

Steps followed in making the tree are:

•    State the problem or recognize the objectives
•    Identify the possible causes of action, (i.e., decision alternative)
•    Recognize the possible states of nature/situations
•    Calculate approximately the probabilities for each state of nature
•    Estimate the restricted pay-off for each alternative and states of nature
•    Draw the decision tree

Compute the predictable monetary value at each state of nature node using the roll back method.

Posted Date: 12/4/2012 7:17:50 AM | Location : United States

Ask an Expert

Related Discussions:- Steps making decisiontree, Assignment Help, Ask Question on Steps making decisiontree, Get Answer, Expert's Help, Steps making decisiontree Discussions

Write discussion on Steps making decisiontree
Your posts are moderated

Write your message here..

Related Questions

Questions., how long will it take to get answers after question are submitt... how long will it take to get answers after question are submitted

What is sunk cost, What is Sunk cost A cost has been incurred in the p... What is Sunk cost A cost has been incurred in the past or sunk in the past and is not relevant to the particular decision making, is a sunk cost. If it is decided to replac

Determine the nature of accounting, The Nature of Accounting Accounti... The Nature of Accounting Accounting is process of recording, analyzing, summarizing, and interpreting financial (money-related) activities to allow individuals as well as org

Z or t statistics, Z or t Statistics If n ≥30 we use Z, if, n Ho:  B ... Z or t Statistics If n ≥30 we use Z, if, n Ho:  B = O that is, there is no relationship between X and Y HA:  B≠ O There is a significant relationship between X and Y The l

Advance factoring and maturity factoring, Advance Factoring and Maturity Fa... Advance Factoring and Maturity Factoring: In both recourse and non-recourse factoring whether the factor advances cash against book debts to the client instantly on assignment

Applications of markov chains, Applications of Markov Chains They are a... Applications of Markov Chains They are a particular class of probabilistic models and their applications include analysis of: Inventory systems Replacement and mainten

Determine abc system and service organizations, ABC System and service orga... ABC System and service organizations The ABC system has been taken up as applied to a manufacturing organizations with the same efficiency. One basic characteristic of service

Pricing over the life cycle of a product, Q. Pricing over the life cycle of... Q. Pricing over the life cycle of a product? The cycle begins with the invention of the new product. The innovation of a new product and its degeneration to a common product is

Theory of financial ratios, Is there a theory for financial ratios Is there a theory for financial ratios

Define performance budgeting according u.s. bureau of budget, Define perfor... Define performance budgeting according U.S. bureau of budget U.S. bureau of budget defines performance budget as one which presents purposes and objectives for which funds are