Law Commons^™

Shaking Decision Trees For Risks And Rewards, Marjorie Corman Aaron

Faculty Articles and Other Publications

This articles explains the power and limitations of the role of numbers in the use of decision trees. Decision tree analysis involves cumulating probabilities. The method is also used to derive a “discounted value”: the sum of each possible outcome multiplied by its cumulative probability. Probability estimates must be true to their location on the tree and must assess interdependence of outcomes at risk pivots. When calculating cumulative probabilities, probabilities along a path must absolutely must be independent. A decision tree that is too simple fails to represent complex realities. One of the strongest reasons to use decision analysis is …