Decision tree

The Decision tree app offers a powerful visual interface that allows you to intuitively build and manage complex decision trees. You can easily annotate new alternatives and outcomes, adjust their levels within the hierarchy, and even drag entire branches to different positions within the tree. The app automatically recalculates all necessary values to reflect any changes, ensuring that your analysis stays accurate and up-to-date.

Each alternative in the tree has a cost, which represents the expected expense of pursuing that option—like $220,000 for opening a new branch in another city. These alternatives are represented as blue-collar elements within the tree and can lead to multiple outcomes. For instance, the outcome of opening a new branch might include a potential increase in turnover, but also the risk of reduced quality due to management challenges.

Each outcome has an associated value, which can be positive or negative, and a probability indicating the likelihood of that outcome occurring. The probable value of each outcome is calculated by multiplying its value by its probability. The net value of an outcome is determined by the weighted influence of the outcome’s value on the overall expected value of the corresponding alternative, minus the cost of implementing that alternative.

The Decision tree app supports decision trees of any depth, where after an outcome, you may encounter another decision alternative, which in turn may have its own outcomes, and so on. This capability allows you to create and explore highly intricate decision trees.

The optimal strategy is identified by tracing the path from the root alternative through the branches that lead to the highest net value. This path represents the best course of action based on a comprehensive analysis of all possible alternatives and outcomes—a task that would be virtually impossible to perform mentally or with a simple paper and pencil due to the extensive calculations required. With the app’s dynamic interface, you can quickly adapt to changing scenarios, and the app will handle all the complex calculations automatically.

The complexity of decisions involving significant uncertainty brings challenges such as unpredictable consequences, multi-layered factors, potential reduction of uncertainty through additional information and the influence of the decision maker's attitude to risk. To manage this complexity, users often look for best practices. Leverage the effectiveness of decision making by applying a decision tree, a proven analytical approach that provides clarity and leads to informed decisions in the midst of uncertainty.

Features:
-Intuitively construct a visual decision tree for a comprehensive decision analysis.
-Generate alternative elements with detailed descriptions and associated costs.
-Define outcomes for each alternative and specify payoff amounts and probabilities for thorough evaluation.
-Dynamically arrange elements to create parent-child relationships at any depth in the tree.
-Construct sequential decision chains that allow subsequent decisions based on specific outcomes.
-Enter the cost of each alternative to accurately assess the impact of the decision.
-Specify nominal profit values and probabilities for each outcome to refine the decision criteria.
-Automatically calculate the path value resulting from the multiplication of value and probability.
-Calculate the net profit, i.e. the result obtained by subtracting the cost of the alternative from the path value of the outcome.
-Automatically visualize the best strategy based on the criteria for the optimal expected value.