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

Define a complete lattice, Define a complete lattice and give one example. ...

Define a complete lattice and give one example. Ans:  A lattice (L, ≤) is said to be a complete lattice if, and only if every non-empty subset S of L has a greatest lower bound

What is the total number of pounds they bought if the total, The student co...

The student council bought two various kinds of candy for the school fair. They purchased 40 pounds of candy at $2.15 per pound and x pounds at $1.90 per pound. What is the total n

An example of build upon the child''s background, What are the other differ...

What are the other differences between learners that a teacher needs to keep in mind, while teaching?  Let us see an example in which a teacher took the pupil's background into acc

Calculate the time average of kinetic energy of the planet, (1) If the coef...

(1) If the coefficient of friction between a box and the bed of a truck is m , What is the maximum acceleration with which the truck can climb a hill, making an angle q with the ho

Example of one-to-one correspondence, An educator placed 10 pebbles in a ro...

An educator placed 10 pebbles in a row and asked four-year-old Jaswant to count how many there were. She asked him to touch the pebbles .while counting them. Jaswant counted the pe

Integrals involving roots - integration techniques, Integrals Involving Roo...

Integrals Involving Roots - Integration Techniques In this part we're going to look at an integration method that can be helpful for some integrals with roots in them. We hav

Shares and dividends, A man invests rs.10400 in 6%shares at rs.104 and rs.1...

A man invests rs.10400 in 6%shares at rs.104 and rs.11440 in 10.4% shares at rs.143.How much income would he get in all?

Example of learning to count, A parent shows his child four pencils. He pla...

A parent shows his child four pencils. He places them in a row in front of her and says "one" as he points to the first pencil, "two" as he points to the second one, "three" as he

Comparing and scaling, a dairy mngr says it takes 70lbs of make 10 lbs of c...

a dairy mngr says it takes 70lbs of make 10 lbs of cottage cheese... How do I make a rate table and a make a graph showing the relationship between lbs of milk and lbs of cottage c

Fraction, sarah has 12 gel pen. she gave 3/4. how many she have

sarah has 12 gel pen. she gave 3/4. how many she have

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