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