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

Determine the angle, In parallelogram ABCD, m∠A = 3x + 10 and m∠D = 2x + 30...

In parallelogram ABCD, m∠A = 3x + 10 and m∠D = 2x + 30, Determine the m∠A. a. 70° b. 40° c. 86° d. 94° d. Adjacent angles in a parallelogram are supplementary. ∠A a

Angles, how do you workout the value of the missing angle

how do you workout the value of the missing angle

Geometry, how do we rotate an object 90 counterclockwise?

how do we rotate an object 90 counterclockwise?

World problem, Buses to Acton leave a bus station every 24 minutes. Buses t...

Buses to Acton leave a bus station every 24 minutes. Buses to Barton leave the same bus station every 20 minutes. A bus to Acton and a bus to Barton both leave the bus station at 9

How to subtract fractions with the same denominators, Q. How to Subtract fr...

Q. How to Subtract fractions with the same denominators? Ans. Subtracting fractions is basically the same as adding them. If you don't know how to add fractions, you shoul

Geometry, RS=8y+4 ST=4y+8 RT=15y-9 a.) WHAT IS THE VALUE OF y b.) FIND RS...

RS=8y+4 ST=4y+8 RT=15y-9 a.) WHAT IS THE VALUE OF y b.) FIND RS, ST, AND RT

Algebra problem solving , A rectangles lenth is (x+4) and width is (x+3).By...

A rectangles lenth is (x+4) and width is (x+3).By adding binomials give its perimiter

solve the game by linear programming, UA and DU are preparing for the NCAA...

UA and DU are preparing for the NCAA basketball game championship. They are setting up their strategies for the championship game. Assessing the strength of their "benches", each c

Derivatives, What are the ingredients of a Mathematical Model? What is a mo...

What are the ingredients of a Mathematical Model? What is a model?

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