Decision/Utility Tree – Assignment Example
Problem Option Outcome Probability Utility Expected Value Total Expected Value Rank Conclusion: Based on the illustration of our decision/utility tree, option number 1 or the option to develop new rides will give the highest benefit for the amusement park. This is because this option has the highest probability of becoming a success having 50% probability and with $3 375 000 expected value, the total expected value calculated was $1 687 500. Developing new rides can also yield as much as $1 842 000 for the amusement park compared to the $1 075 000 total expected value of creating new non-rides attraction and $ 1 200 000 if the management will choose to refurbish existing rides and attractions. Therefore, the best option is to develop new rides for the amusement park.
The primary advantage of a decision tree is that it assigns exact values to the outcomes of different actions thus minimizing the ambiguity of complicated decisions (Gregory & Clemen, n.d.). In this problem, the use of probability and expected value variables contributed to the outcome and findings by giving a good measure of the value of the option because over the long run this will be the average amount that the amusement park expects to make from selecting the option.
The use of a decision/ utility tree can be very useful for our global problem as it serves as simple visual tool, for our individual perspective. This is admittedly a highly simplified picture of a more complex decision (Gregory and Clemen, n.d.). Using a decision tree to depict a decision opportunity, can be extremely useful for (a)representing the possible outcomes, (b) initiating a discussion of uncertain events and their implications, and (c) distinguishing between what is within our control (the decision nodes or the problem) and what is open to chance (outcomes). It is also a very helpful as an analytical tool in decision making as it makes consequences more salient. Decision trees can also stimulate discussions about additional factors such as the costs. We can use decision trees as a transparent and engaging tool for quickly capturing the salient aspects of a choice.
Gregory, R. S., & Clemen, R. T. (n.d.). Beyond Critical Thinking: A Framework for Developing the Decision - Making . Retrieved November 3, 2010, from Faculty.Fugua.Duke.Edu: http://faculty.fuqua.duke.edu/~clemen/bio/Beyond.pdf