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Decision Tree

Definition - What does Decision Tree mean?

A decision tree is a graphical representation of specific decision situations that are used when complex branching occurs in a structured decision process. A decision tree is a predictive model based on a branching series of Boolean tests that use specific facts to make more generalized conclusions.

The main components of a decision tree involve decision points represented by nodes, actions and specific choices from a decision point. Each rule within a decision tree is represented by tracing a series of paths from root to node to the next node and so on until an action is reached.

Techopedia explains Decision Tree

Decision trees are a popular and powerful tool used for classification and prediction purposes. Decision trees provide a convenient alternative for viewing and managing large sets of business rules, allowing them be translated in a way that allows humans to understand them and apply the rules constraints in a database so that records falling into a specific category are sure to be retrieved.

Decision trees generally consist of the following four steps:

  1. Structuring the problem as a tree by creating end nodes of the branches, which are associated with a specific path or scenario along the tree
  2. Assigning subject probabilities to each represented event on the tree
  3. Assigning payoffs for consequences. This could be a specific dollar amount or utility value that is associated with a particular scenario.
  4. Identifying and selecting the appropriate course(s) of action based on analyses
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