Agricultural Economics Department
Date of this Version
8-8-2024
Document Type
Article
Citation
Parsons, J., Hewlett, J., Tranel, J. “Branching Out: Harnessing the Power of Decision Trees” CAP Series 24-0802, Center for Agricultural Profitability, University of Nebraska-Lincoln, Aug. 8, 2024. DOI: 10.32873/unl.dc.cap044.
Abstract
In today’s world, full of risk and uncertainty, agricultural producers face a very challenging decision-making environment. Their decisions are often a complex sequence of choices made over time, during which uncertainties are revealed and additional information is gathered. A decision tree or decision flow diagram can aid in the decision-making process by providing a clear graphical representation of the sequence of events and relevant information.
A decision tree contains the relevant courses of action, event uncertainties, and potential outcomes in the order they are expected to occur through time. Like the decisions they are meant to represent, decision trees can become very complex, very quickly. However, constructing a decision tree forces the decision-maker to think through a road map that summarizes future decision points where they can exercise control and future uncertainties where chance determines the direction taken.