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Key MBA Models by Dr. Julian Birkinshaw, Ken Mark

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Decision trees

Decision trees assist in the choice between two or more courses of action. By laying out options and outcomes for each choice, assigning values and probabilities along the way, you can form a balanced picture of the risks and rewards.

When to use it

  • When a problem is complex enough that laying out each option, explicitly, will assist in forming a decision.
  • To enable decision makers explicitly to compare the costs and benefits of each outcome.

Origins

While decision trees have been in some form for centuries (consider that ‘Bayes theorem’ – which can be used to compute probability inputs for decision trees – was first stated in the eighteenth century), they became more widespread with the rise in popularity of computer ...

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