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

Poisson mathematical properties, Poisson Mathematical Properties 1. Th...

Poisson Mathematical Properties 1. The expected or mean value = np = λ Whereas; n = Sample Size p = Probability of success 2. The variance = np = ? 3. Standard dev

Partitioning -types of word problems related to subtraction, Partitioning ...

Partitioning - an action of taking away or removing some objects, and finding out how many remain. (e.g., there were 15 toffees in this container, and 10 have been eaten. How many

Compound interest, some experts estimate that the cost of education in the ...

some experts estimate that the cost of education in the US increases by 6% p.a. An Ivy League college currently costs $24,502 for one year''s study today. Using compound interest r

Course work2 , (b) The arity of an operator in propositional logic is the n...

(b) The arity of an operator in propositional logic is the number of propositional variables that it acts on – for example, binary operations (e.g, AND, OR, XOR…) act on two propo

What is the greatest common factor of 24 and 64, What is the greatest commo...

What is the greatest common factor of 24 and 64? List the factors of 24 and 64. The largest factor that they have in common is the greatest common factor. Factors of 24: 1,

Find out a if f(x) is continuous at x = -2 , Example   Given the graph of ...

Example   Given the graph of f(x), illustrated below, find out if f(x) is continuous at x = -2 , x = 0 , and x = 3 . Solution To give answer of the question for each

What are the angles of depression from observing position, In Figure, what ...

In Figure, what are the angles of depression from the observing positions O 1 and O 2 of the object at A?

Random variable, RANDOM VARIABLE A variable which assumes differ...

RANDOM VARIABLE A variable which assumes different numerical values as a result of random experiments or random occurrences is known as a random variable. The rainfal

Prime Ideals, Given a standard 2x3 matrix show the ideal formed by the 2x2 ...

Given a standard 2x3 matrix show the ideal formed by the 2x2 minors is Prime.

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