decision-tree-analysis

Decide between options whose payoff depends on uncertain outcomes, using a decision tree and expected monetary value (EMV). Always use this skill when someone asks whether to launch, invest, expand, bid, settle, build or drill and gives, or can estimate, payoffs and the chances of each outcome, even when the question sounds like a simple yes or no. Also use it to lay out decision and chance nodes and fold the tree back; compare several risky options; test how sensitive the choice is to a probability or payoff, or find the breakeven probability where it flips; or decide whether risk aversion, a utility function or a worst-case view should override expected value. Not for decision tree, random forest or boosting models trained on data, not for pricing a test, survey or pilot before deciding, not for simulating many uncertain inputs, and not for explaining what a decision tree is when no decision is in play.