Estimation problems refer to the process of determining the value or quantity of something based on available data. These problems exist in a variety of disciplines, including finance, engineering, and statistics.
Using a logical tree, also known as a decision tree, to solve estimation problems is one approach. This technique involves decomposing the problem into subproblems, each with a set of potential outcomes and associated probabilities. By traversing the tree, it is possible to estimate the magnitude of the problem as a whole.
The top-down or bottom-up strategy is another method. The top-down approach begins with a global estimate, which is then broken down into smaller and more specific estimates. The bottom-up approach begins with the most specific estimates and works its way up to the global estimate. Both approaches have benefits and drawbacks, and the approach chosen will depend on the nature of the problem at hand and the information available.
In finance, for instance, a company might estimate the value of its stock using a bottom-up method. The company would begin by estimating the value of each of its business units before summing them to arrive at an estimate of the company’s value as a whole. In project management, however, a top-down approach may be used to estimate the overall cost of a project by breaking it down into smaller tasks and estimating the cost of each task.
According to a review of the relevant literature, both approaches have been used for cost and schedule estimation in the field of project management. For instance, Flyvbjerg et al. (2003) found that traditional bottom-up approaches tend to be more accurate, but also more time- and resource-intensive than top-down approaches. In contrast, top-down approaches are more efficient and require fewer resources, but they may not be as accurate.
In conclusion, estimation problems can be solved using a logical tree or a top-down and bottom-up strategy. The approach chosen will depend on the nature of the issue and the information available. Both approaches have been used in literary works, and both have their benefits and drawbacks.
