The methods discussed in this section can be useful in exploring alternative futures. For example, decision trees are a recommended way of thinking about attaching revenues, costs, and probabilities to technology decisions. Bayesian estimation is a way of thinking about how given or observed information changes decisions. The value of perfect or imperfect information is discussed. Finally, real options analysis, from financial analysis, is introduced.
6.7.1 Decision Trees
Decision trees parade under various names; however, all of them are tracing techniques (Section 9.4.2) that depict relationships between various members of sets of entities. An example illustrates how decision trees can be used. Figure 6.13 depicts a tree for a decision about an identification scheme for a logistics system.
The two options for the system are RFID and Barcode. If RFID is chosen, there are two additional options. One is to use a new technology that has a reading range for passive RFID tags up to 100 meters. The net return for this system is $1,000,000, but the probability of success is only 0.3. The other option is to use the existing technology for which the reading range is up to 6 meters with a net return of $750,000. The probability of success is much higher, 0.7, even though some continue to call it “black magic.”
The alternative ...