DQ1cc, DQ2ab, DQ3CC - Essay Example

DQ1 Decision trees are an inferential statistics technique that can be used by executive managers, statisticians, or other decision makers within anorganization to make better operating decisions. “A decision tree is a graphical device that is helpful in structuring and analyzing such problems” (Britannica, 2012). An image of a decision tree is illustrated below:(Google, 2012). The example you mentioned about Gerber products was very insightful and interesting. Managers can use decision trees for a wide variety of applications.

As you mentioned in your response a decision tree must contain decision nodes, change nodes, and end nodes. Software tools such as SPSS can be utilized to solve decision tree problems (Ibm). The decision tree itself is considered a mathematical algorithm. DQ2 A probability can be defined as a numerical measure of the likelihood that a specific event will occur or not (Mann, 1995). Some of the different approaches to probability include classical probability, relative frequency concept of probability, and subjective probability.

The use of probability is widely applied in the business world due to the fact that probability is a statistical method of a numerical chance of the occurrence of an event. For instance a company can use probability to determine whether to invest in a derivative instrument based on the changes of a commodity going up. For the application of probability to be valid the data inserted into the model must be up to date and accurate. For instance if a governmental agency attempts to predict the future behavior of the unemployment rate it would not be wise to use data from the 1950’s to insert into the probability model.

The correct approach would be to use current unemployment data. “From principles is derived probability, but truth or certainty is obtained only from facts” (Stoppard, 2012). DQ3Probability can be used by individuals and managers in different scenarios. A place where probability is constantly used by players is in casinos. Casino games have different probabilities of winning. For instance the casino game that has the higher probability for the player is blackjack which offers a probability of 51% for the house and 49% for the player.

Managers should use probability in their decision making process. A manager should not accept any decisions that have a probability of less than 50% of occurrence. Companies can establish decision making policies based on a minimum probability threshold. If I was choosing between two options one which had high probability and one with a low probability I would choose the option with the high probability due to the fact that chances of that option occurring are higher. The option with low probability is an unnecessary risk that the company should not consider.

ReferencesBritannica.com (2012). Decision Tree. Retrieved July 11, 2012 from http://www.britannica.com/EBchecked/topic/155160/decision-tree Google.com (2012). Decision Trees. Retrieved July 11, 2012 from https://www.google.com.pr/search?q=decision+trees+statistics&hl=es-419&prmd=imvnsa&tbm=isch&tbo=u&source=univ&sa=X&ei=Y5D9T9ePIYau8QTUnaj6Bg&ved=0CIABELAE&biw=1366&bih=610 Ibm.com. IBM SPSS. Retrieved July 11, 2012 from http://www-01.ibm.com/software/analytics/spss/products/statistics/decision-trees/features.

html Mann, P. (1995). Statistics for Business and Economics. New York: John Wiley & Sons. Stoppard, T. (2012). Probability quotes. Retrieved July 11, 2012 from http://www.brainyquote.com/quotes/keywords/probability.html