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

I-phones in one year, Assume company A expects to enhance unit sales of i-p...

Assume company A expects to enhance unit sales of i-phone by 15% per year for the next 5 years. If you presently sell 3 million i-phones in one year, how many phones do you expect

Trigonometry, sin^2alpha *sec^2beta +tan^2 beta *cos^2alpha=sin^2alpha+tan^...

sin^2alpha *sec^2beta +tan^2 beta *cos^2alpha=sin^2alpha+tan^2 beta

Sum and difference identities, Q. Sum and Difference Identities? Ans. ...

Q. Sum and Difference Identities? Ans. These six sum and difference identities express trigonometric functions of (u ± v) as functions of u and v alone.

What is the length of the longer base, The longer base of a trapezoid is th...

The longer base of a trapezoid is three times the shorter base. The nonparallel sides are congruent. The nonparallel side is 5 cm more that the shorter base. The perimeter of the t

Ellipse, How we find locus of the middle points of chord of an ellipse whic...

How we find locus of the middle points of chord of an ellipse which are drawn through the positive end of the minor axes

In how many years is the population expected to be 42, The population of a ...

The population of a particular city is increasing at a rate proportional to its size. It follows the function P(t) = 1 + ke 0.1t where k is a constant and t is the time in years.

Iti, Gm signal is better than am signal becuase

Gm signal is better than am signal becuase

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