Value of perfect information, Mathematics

Assignment Help:

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

 


Related Discussions:- Value of perfect information

Rita, Calculate 50%

Calculate 50%

The bionomial theorem for rational index, use the bionomial theorem to expa...

use the bionomial theorem to expand x+2/(2-X)(WHOLE SQUARE 2)

Which of the following sets are equal, Which of the following sets are equa...

Which of the following sets are equal? S 1 = {1, 2, 2, 3}, S 2 = {x | x 2 - 2x + 1 = 0}, S 3 = {1, 2, 3}, S 4 = {x | x 3 - 6x

Prove that one of three consecutive integers divisible by 3, Prove that one...

Prove that one of every three consecutive integers is divisible by 3. Ans: n,n+1,n+2 be three consecutive positive integers We know that n is of the form 3q, 3q +1, 3q +

Determine the area of the walkway, Mark is preparing a walkway around his i...

Mark is preparing a walkway around his inground pool. The pool is 20 by 40 ft and the walkway is intended to be 4 ft wide. Determine the area of the walkway? a. 224 ft 2 b.

Find out that sets of functions are linearly dependent, Find out if the fol...

Find out if the following sets of functions are linearly dependent or independent.  (a) f (  x ) = 9 cos ( 2 x )    g (  x ) = 2 cos2 (  x ) -  2 sin 2 (  x ) (b) f

Differentiation, Need Solution Find (dy)/( dx) for; (i). y = x 7 ...

Need Solution Find (dy)/( dx) for; (i). y = x 7 (ii). y = x 2γ (iii). y = x -3 (iv). y = x

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd