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How do you use decision tree analysis?

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Quick Answer

Decision-tree analysis is used by evaluating alternatives presented in a graphical format. Decision trees feature a tree-like graph that represents the statistical probabilities, uncertainties, resource costs, potential courses of action and possible consequences faced by a decision maker. They are used to help find answers to complex problems.

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Full Answer

The structure of a decision tree, which is similar to a flow chart, illustrates how one choice leads to the next in the series and shows the relationship between decisions and events. Use of branches in a decision-tree chart show options that cannot occur at the same time. Components of a decision tree include "chance nodes," which are shown as circles. "Decision nodes" are shown as squares, and "end nodes" are shown as triangles on the chart.

Decision trees are often used in research relating to operations to help uncover strategies most likely to meet particular goals. They are also used in business, law, health-care management and other fields. Decision analysis is often used by large corporations considering major investments of capital. Undergraduate students in public health, business and health economics often learn how to use decision trees and other decision-analysis tools. As of 2014, the discipline of decision analysis is controversial among some researchers who do not feel that it applies well to decisions made under pressure.

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