Constructing Decision Trees: A Business Case Study

The video tutorial explains how to construct decision trees using a business scenario where a company must decide whether to invest £10,000 to increase the probability of capitalizing on a £100,000 breakthrough. It covers decision nodes, chance nodes, and the calculation of probabilities and payoffs. The tutorial concludes with determining the optimal decision based on expected outcomes.

What is the final payoff if the business capitalizes on the breakthrough?

What is the probability of failure if the business does not invest?

How can the business determine the optimal decision based on the decision tree?