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

Calculate the probability, Calculate the introduction to Probability? P...

Calculate the introduction to Probability? Probability refers to the chance that an event will happen. Probability is presented as the ratio of the number of ways an event can

Reduction formulae, Reduction formulae Script for Introduction: ...

Reduction formulae Script for Introduction: First let us know what is meant by reduction formula. In simple words,                 A formula which expressess(or re

the system by graphing, Suppose you are in the market for a new home and a...

Suppose you are in the market for a new home and are interested in a new housing community under construction in a another city. a) The sales representative later shows that there

Describe least three characteristics at medieval world, Based upon the prim...

Based upon the primary sources, describe at least three characteristics that mark the early modern world as distinctly different than the Medieval world that preceded it. You might

Probability - Compound Events, David wants to rent a movie. He wants to wat...

David wants to rent a movie. He wants to watch either a comedy or a drama. The movie rental store has 18 comedies and dramas available for rent. Seven of the movies are comedies, a

Counters and registers, design a synchronous, recycling, MOD-12 counter wit...

design a synchronous, recycling, MOD-12 counter with D FF''s. Use the states 0000 through 1011 in the counter.

NUMERICAL PARTIAL DIFFERENTIAL EQUATIONS, Our objective is solve the follo...

Our objective is solve the following fourth-order BVP: (a(x)u'' )'' = f (x) u(0) = u(1)=0 u(0)' = u(1)'=0 (a) Give the variational formulation of the above BVP. (b) Describe the

Inverse tangent, Inverse Tangent : Following is the definition of the inve...

Inverse Tangent : Following is the definition of the inverse tangent.  y = tan -1 x     ⇔ tan y = x                     for            -∏/2 ≤ y ≤ ?/2 Again, we have a limi

Sample of proportion program., help me with how to write sample of proport...

help me with how to write sample of proportion using visual basic

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