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

Answer, #questi0+50x1-60-60x0+10on..

#questi0+50x1-60-60x0+10on..

Which of the subsequent represents the cost y of phone call, A telephone co...

A telephone company charges $.35 for the first minute of a phone call and $.15 for each additional minute of the call. Which of the subsequent represents the cost y of a phone call

Even and odd functions, Even and Odd Functions : This is the final topic ...

Even and Odd Functions : This is the final topic that we have to discuss in this chapter.  Firstly, an even function is any function which satisfies,

Mean is 8.32 find the median, In a frequency distribution mode is 7.88, mea...

In a frequency distribution mode is 7.88, mean is 8.32 find the median.  (Ans: 8.17) Ans:  Mode = 3 median - 2 mean 7.88 = 3 median - 2 x 8.32 7.88 +16.64 = 3 median

Equivalence class and equivalence relation, 1. For a function f : Z → Z, le...

1. For a function f : Z → Z, let R be the relation on Z given by xRy iff f(x) = f(y). (a) Prove that R is an equivalence relation on Z. (b) If for every x ? Z, the equivalenc

Personal assistance needed, I have an original finding on the subject of pr...

I have an original finding on the subject of prime distribution and would like expert help in my endeavors. I have written a paper describing everything in detail and demonstration

Introduction to knowing your maths learner, INTRODUCTION : The other day I...

INTRODUCTION : The other day I overheard 6-year-old Ahmed explaining to his older sister about why swallowing the seeds of an orange is harmful. He said, "The seed will become a p

Pre-operational stage-development learning maths, Pre-operational Stage : ...

Pre-operational Stage :  This period of a child's cognitive development usually begins at the age of 2, and lasts until about the age of 6. Thus, it usually coincides with the pre

Supply/demand, For the pair of supply-and-demand equations, where x represe...

For the pair of supply-and-demand equations, where x represents the quantity demanded in units of 1000 and p is the unit price in dollars, find the equilibrium quantity and the equ

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