Decision Tree
- Visual branching structure that maps decisions, actions, and their possible outcomes.
- Branches represent possible decisions or actions; sub-branches represent potential outcomes.
- Can be updated as new information becomes available, supporting flexible, dynamic decision-making.
Definition
Section titled “Definition”A decision tree is a graphical representation of a decision-making process that helps individuals and organizations make better decisions by considering various options and the potential outcomes of each. The tree is divided into branches, with each branch representing a possible decision or action, and sub-branches representing potential outcomes of that decision or action.
Explanation
Section titled “Explanation”The tree structure starts at an initial decision point and splits into different branches for each possible choice. Each branch can be further divided into sub-branches that represent subsequent decisions or the potential outcomes of the preceding action. Final branches correspond to the possible end outcomes of the decision process (for example, launching a product and achieving success, or launching a product and failing). This visual layout lets decision-makers follow paths from choices to consequences and consider multiple option-outcome combinations.
Examples
Section titled “Examples”New product launch
Section titled “New product launch”The initial branch is the decision to launch a new product, with sub-branches for different product options. For each product option, additional branches represent potential market demand, competition, and profitability. The final branches represent potential outcomes such as launching the product and achieving success, or launching the product and failing.
Stock investment
Section titled “Stock investment”The initial branch is the decision to invest, with sub-branches representing different stock options. For each stock option, additional branches represent potential risk, return, and market conditions. The final branches represent potential outcomes such as investing and achieving a high return, or investing and losing money.
Use cases
Section titled “Use cases”- Decision-making by individuals and organizations when multiple options and potential outcomes must be considered.
Notes or pitfalls
Section titled “Notes or pitfalls”- Decision trees can be updated as new information becomes available, allowing for a more flexible and dynamic decision-making process.