A decision tree is a visual representation of a problem and its alternative solutions. A decision tree helps decompose a complex problem into smaller, more manageable undertakings. This allows the decision-makers to make smaller determinations along the way to achieve the optimal overall decision. Decision tree analysis is a formal, structured approach to making decisions.

Use of decision trees

Decision trees are most often used in situations of uncertainty. They can help decision-makers select the best course of action. Based on past experience and information, decision-makers usually have some knowledge of possible outcomes and the likelihood of each. Using the probability of each outcome and the resulting business value of these outcomes, decision trees can help select the most favorable option. Decision trees help form an accurate, balanced picture of the risks and rewards of a particular choice.

Decision trees clearly lay out the problem at...