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

Counting, how do i count by 45s

how do i count by 45s

Quantitative Techniques, The following table given the these scores and sal...

The following table given the these scores and sales be nine salesman during last one year in a certain firm: text scores sales (in 000''rupees) 14 31 19

Algebra, what is the answers of exercise 3.1

what is the answers of exercise 3.1

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

Determine the measure of angle, Using the expample provided below, if m∠ABE...

Using the expample provided below, if m∠ABE = 4x + 5 and m∠CBD = 7x - 10, Determine the measure of ∠ABE. a. 155° b. 73° c. 107° d. 25° d. ∠CBD and ∠ABE are vert

Relative motion, how to find the minimum distance between any two particles...

how to find the minimum distance between any two particles which are in relative motion?

Linear Equations, y= -3x tell if it is linear or not. our teacher wants it ...

y= -3x tell if it is linear or not. our teacher wants it graphed or something.

Calculate the area of remaining piece of cardboard, A piece of cardboard in...

A piece of cardboard in the shape of a trapezium ABCD & AB || DE, ∠ BCD = 900, quarter circle BFEC is removed. Given AB = BC = 3.5 cm, DE = 2 cm. Calculate the area of remaining p

Formulas of summation notation, Formulas Now there are a couple of nice...

Formulas Now there are a couple of nice formulas which we will get useful in a couple of sections. Consider that these formulas are only true if starting at i = 1. You can, obv

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