Firms should use simulation for evaluating decisions when
A)underlying decision trees are simple and explicit solutions for the underlying decision tree are difficult to obtain.
B)underlying decision trees are very complex and explicit solutions for the underlying decision tree are difficult to obtain.
C)underlying decision trees are simple and explicit solutions for the underlying decision tree are easy to obtain.
D)underlying decision trees are very complex and explicit solutions for the underlying decision tree are easy to obtain.

Question

Quizplus · Accepted Answer

Simulations are most useful when underlying decision trees are very complex and explicit solutions for the underlying decision tree are difficult to obtain. In such cases, simulations can help to generate probabilistic outcomes and assess the impact of different decisions under different scenarios. When decision trees are simple and explicit solutions are easy to obtain, simulations may not be necessary as the outcomes are clear and straightforward.

Firms Should Use Simulation for Evaluating Decisions When