Quantitative Analysis for Management, 13/e

3.6 Decision Trees

Any problem that can be presented in a decision table can also be graphically illustrated in a decision tree. All decision trees are similar in that they contain decision nodes or decision points and state-of-nature nodes or state-of-nature points:

• A decision node from which one of several alternatives may be chosen

• A state-of-nature node out of which one state of nature will occur

In drawing the tree, we begin at the left and move to the right. Thus, the tree presents the decisions and outcomes in sequential order. Lines or branches from the squares (decision nodes) represent alternatives, and branches from the circles represent the states of nature. Figure 3.2 gives the basic decision tree for the Thompson Lumber example. ...