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The analysis of complex decisions with uncertainty can be confusing
because the consequence that will result from selecting any decision
alternative cannot be predicted with certainty, there are often a large factors that must be taken into account when making the decision, it may be useful to consider the possibility of reducing the uncertainty in the
decision by collecting additional information, and decision maker's attitude
toward risk taking can impact the relative desirability of alternatives. A decision tree is a diagram that read from left to right. At the left,
indicated with a small square, is the decision to select among the three alternatives, which are the temperature sensor, the pressure sensor, or neither.
The development costs for the develop temperature sensor and develop
pressure sensor alternatives are shown on the branches for those alternatives.
At the right of the development costs are small circles which represent the uncertainty
about whether the development outcome will be a success or a failure. The
branches to the right of each circle show the possible development outcomes. On
the branch representing each possible development outcome, the sales revenue is
shown for the alternative, assuming either success or failure for the development.
Finally, the net profit is shown at the far right of the tree for each possible combination
of development alternative and development outcome. This tool help, although knowing the probabilities and get the best alternative for a decision,( Berger, james, 2013)
Berger, James O. Statistical decision theory and Bayesian analysis. Springer Science & Business Media, 2013.
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