Decision Tree Analysis

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Decision Tree Analysis 

Definition: A decision analysis is usually structured as a decision tree. The decision tree is a diagram that describes a decision under consideration and the implications of choosing one or another of the available alternatives. It incorporates probabilities of risks and the costs or rewards of each logical path of events and future decisions.
Solving the decision tree indicates which decision yields the greatest expected value to the decision-maker when all the uncertain implications, costs, rewards, and subsequent decisions are quantified.

Acceptance Level:  Generally accepted

Alternative or Related Terms: Decision tree, risk analysis

Application Areas/Intended Uses: Decision tree analysis is a tool or technique of the quantitative risk analysis process.

Chief Advantages: This tool describes a decision under consideration and the implications of choosing one or another of the available alternatives. It incorporates probabilities or risks and the costs or rewards of each logical path of events and future decisions.

Additional Reading:
Project Risk Management: By the Numbers. [Decision Analysis in
Projects series, 5 of 6] John Schuyler. PM Network, September, 2000, 69, 71, 73.