probability trees/decision trees

Question 1

benefits of decision trees

Answer 1

• Choices are set out in a logical way
• Potential options & choices are considered at the same time
• Use of probabilities enables the “risk” of the options to be addressed
• Likely costs are considered as well as potential benefits
• Easy to understand & tangible results

Question 2

drawbacks of decision trees

Answer 2

• Probabilities are just estimates – always prone to error
• Uses quantitative data only – ignores qualitative aspects of decisions
• Assignment of probabilities and expected values prone to bias
• Decision-making technique doesn’t necessarily reduce the amount of risk