Decision tree analysis

Revision as of 17:03, 19 February 2023

Abstract

A common machine learning algorithm called decision tree analysis is used to categorize and predict outcomes based on a collection of input features ^[1]. Each node represents a choice, and each branch represents one or more potential outcomes, creating a tree-like model of decisions and their potential effects. In order to decide what actions to take at each node based on the input features, the algorithm learns from a training collection of labeled data.

Many industries, including banking, medicine, marketing, and engineering, use decision tree analysis ^[2]. It is especially helpful for issues with binary outcomes, like predicting client churn, determining credit risk, and spotting fraud ^[3]. Decision trees are a popular option for outlining the decision-making process to stakeholders because they are simple to understand ^[4].

Decision trees can, however, be vulnerable to overfitting, which can result in subpar performance on new data. To get around this, methods like regularization, ensembling, and trimming can be used to improve the model ^[4].

Pruning is a technique that involves cutting off limbs from the tree that do not increase the model's accuracy when applied to fresh data. A method called assembling joins different decision trees to produce a more reliable model. By penalizing complexity in the tree, regularization keeps it from getting too complicated and overfitting the training data ^[4].

Application

Real life examples

Finance: In the banking and financial sector, decision tree analysis is used for credit scoring, risk management, and fraud discovery ^{[5] [6]}.

In medicine, decision tree analysis is used to make clinical decisions, diagnose diseases, and determine the fate of patients ^{[7] [8]}.

Marketing: Customer segmentation, marketing targeting, and product recommendation all use decision tree analysis ^{[2] [9]}.

Engineering: In production and engineering, decision tree analysis is used for fault diagnosis, quality control, and process optimization ^{[10] [11]}.

Environmental science: decision tree analysis is used in species distribution modeling, land use planning, and environmental impact evaluation ^{[12] [13]}.

Limitations

Decision trees are susceptible to overfitting, which happens when the model interprets training data as noise rather than the underlying pattern ^{[14] [15]}.

Decision trees are sensitive to small changes in the data or model parameters and can be unstable. This can lead to various tree structures or predictions^{[1] [4]}(Breiman et al., 1984; Hastie et al., 2001).

Decision trees may be biased toward factors with a high cardinality or number of categories, which could lead to an over- or under-representation of particular categories (James et al., 2013; Zadrozny & Elkan, 2002).

Interpretability: When dealing with big or complex trees that have numerous branches or nodes, decision trees can be challenging to understand and interpret (Caruana et al., 2015; Lakkaraju et al., 2016).

References

1. ↑ ^{1.0 1.1} Breiman, L., Friedman, J., Stone, C. J., & Olshen, R. A. (1984). Classification and regression trees. Chapman and Hall
2. ↑ ^{2.0 2.1} Kotsiantis, S. B., Zaharakis, I. D., & Pintelas, P. E. (2006). Machine learning: a review of classification and combining techniques. Artificial Intelligence Review, 26(3), 159-190
3. ↑ Wasserman, L. (2013). All of statistics: A concise course in statistical inference. Springer Science & Business Media(Wasserman, 2013)
4. ↑ ^{4.0 4.1 4.2 4.3} Hastie, T., Tibshirani, R., & Friedman, J. (2009). The elements of statistical learning: Data mining, inference, and prediction (2nd ed.). Springer
5. ↑ Kohavi, R., & Provost, F. (1998). Glossary of terms. Machine learning, 30(2-3), 271-274
6. ↑ Tang, F., Zeng, G., Deng, L., Huang, G., Li, X., & Wang, X. (2015). Decision tree models for effective credit scoring in peer-to-peer online microloan platforms. Decision Support Systems, 78, 15-26
7. ↑ Chen, J., Guo, Y., Li, S., Li, J., & Li, J. (2019). A decision tree approach to predicting the survival of gastric cancer patients. Journal of Cellular Biochemistry, 120(8), 13144-13151
8. ↑ Leite, F. N., Oliveira, C. A., Cunha, A. M., Körbes, D., Fumagalli, F., & Leite, J. S. (2018). Decision trees for predicting breast cancer recurrence using clinical data. Expert Systems with Applications, 94, 97-103
9. ↑ Verbeke, W., Dejaeger, K., Martens, D., Hur, J., Baesens, B., & Vanthienen, J. (2014). A novel profit-based classification model for customer base analysis
10. ↑ Al-Marwani, A., Ramachandran, M., & Subramanian, R. (2020). A review on the application of decision tree and random forest algorithms in engineering. Journal of Advanced Research in Dynamical and Control Systems, 12(02), 317-330
11. ↑ Chen, G., Gao, X., & Li, C. (2015). Decision tree-based quality control for ultrasonic welding of lithium-ion battery. Journal of Materials Processing Technology, 215, 82-90.
12. ↑ Figueiredo, R. O., Rocha, J. C. V., & Tavares, R. A. (2019). Decision tree models for environmental impact assessment. Environmental Modelling & Software, 120, 104488
13. ↑ Pu, J., Tang, Q., & Yao, X. (2020). A comparative study of decision tree algorithms for modeling the spatial distribution of forest soil nutrients. Science of The Total Environment, 714, 136836
14. ↑ Kuhn, M., & Johnson, K. (2013). Applied predictive modeling. Springer
15. ↑ Quinlan, J. R. (1993). C4.5: Programs for machine learning. Morgan Kaufmann