Value of perfect information, Mathematics

Value of perfect information

This relates to the amount that we would pay for an item of information such would enable us to forecast the exact conditions of the market and act accordingly.

The EVPI or expected value of perfect information is the expected outcome along with perfect information minus the expected outcome with no perfect information namely the maximum EMV

Illustration

From above table and described that the probabilities are Boom 0.6, steady state 0.3 and recession 0.1 then

When situations of the market are; boom launch product C: profit = 16

When situations of the market are; steady state launch product B: profit = 6

When situations of the market are; recession launch product B: profit = 12

The expected profit along with perfect information will be

(16 x 0.6) + (6 x 0.3)  + (12 x 0.1) = 12.6

Our expected profit choosing product C is 7

The maximum price that we would pay for perfect information is 12.6 - 7 = 5.6

 

Posted Date: 2/19/2013 4:30:22 AM | Location : United States







Related Discussions:- Value of perfect information, Assignment Help, Ask Question on Value of perfect information, Get Answer, Expert's Help, Value of perfect information Discussions

Write discussion on Value of perfect information
Your posts are moderated
Related Questions
if area of a rectangle is 27 sqmtr and it perimeter is 24 m find the length and breath#


Correlation and Regression Correlation CORRELATION is an important statistical concept which refers to association or interrelationship among variables. The reasons of

discuss the sequencing decision problem for n jobs on two and three machines

Where can I find sample questions of Unitary Method for kids to practice? I need  Unitary Method  study material if availbale here on website, i found there is very useful material

Give an example of Numerator and Denominator? Fractions represent parts of a whole object. Fractions are written using a horizontal line, with one number on top of the line and

Q. Diffrence between Rational and Irrational Numbers? Ans. A number which is not rational is called irrational. The word "irrational" sounds not quite right...as though th

Application of Linear Equations We are going to talk about applications to linear equations.  Or, put in other terms, now we will start looking at story problems or word probl

A box is 30 cm long, 8 cm wide and 12 cm high. Determine the length of the diagonal AB ? Round to the nearest tenth. a. 34.5 cm b. 32.1 cm c. 35.2 cm d. 33.3 cm