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

Rules of integration, Rules of Integration 1. If ...

Rules of Integration 1. If 'k' is a constant then ∫Kdx =  kx + c 2. In

Integration, Integration We have, so far, seen that differential ...

Integration We have, so far, seen that differential calculus measures the rate of change of functions. Differentiation is the process of finding the derivative

Algebra, sir i want to ask u a question and that is if we simplify this wha...

sir i want to ask u a question and that is if we simplify this what will be the answer.(9x-45z+6y-100z+5x)

Find the interval of validity for the solution, Solve the subsequent IVP an...

Solve the subsequent IVP and find the interval of validity for the solution xyy' + 4x 2 + y 2 = 0,       y(2) = -7,          x > 0 Solution: Let's first divide on both

Solving equations and/or word problems for the unknowns, With their fence i...

With their fence in place, Zack and Clint set to work landscaping yards. Since Clint did the majority of the actual landscaping and planting, he worked on the average more hours t

Sphere and cone, How tall does a cone with diameter of 10 inches have to be...

How tall does a cone with diameter of 10 inches have to be to fit exactly half of a sphere with a diameter of 10 inches inside it?

Find regular grammar for given regular expression, find regular grammar for...

find regular grammar for the following regular expression: a(a+b)*(ab* +ba*)b

Solids, a can of soup is shaped like wich solid

a can of soup is shaped like wich solid

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