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3.3.3 Decision trees - Coggle Diagram
3.3.3 Decision trees
Drawing the tree
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when there's no further chance events or decisions to follow, not the expected return at the end of each branch
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Limitations
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new problems mean previous occurrences cannot be used to base estimated probabilities and outcomes on, reducing the reliability of the data further
bias can be introduced by whoever is estimating probabilities and outcomes if they want to influence the outcome of the decision
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Making calculations
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return x probability of outcome +(the same formula for any other branch of the circle)= expected value
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compare the expected values of each decision option (square's cost) - business will choose the higher value
Advantages
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problems are set out clearly, encouraging a logical approach
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Exam tip
if you're given a tree diagram, look for whether there may have been any bias generated by the source of data favouring one option over others
a diagram showing the options and possible outcomes involved in making a decision along with the probabilities of outcomes occurring
used when faced with quantifiable decisions, an analytical approach to setting out the problem and assessing the atlernatives
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