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

Modi method, why modi method is used in operation research

why modi method is used in operation research

Describe multiplication and division equations, Describe Multiplication and...

Describe Multiplication and Division Equations? Multiplication Equations :  To solve multiplication equations, divide both sides of the equation by the number being multiplie

Adding fractions with the same denominator, Q. Adding Fractions with the Sa...

Q. Adding Fractions with the Same Denominator? Adding fractions with the same denominator is easy- you add the numerators (the tops), and you leave the denominator alone!

Conversion\, how many mg are there in g?

how many mg are there in g?

Hi, can i get job of teaching maths here

can i get job of teaching maths here

Commercial, The C.P. of 20 articles is same as theS.P. of x articles.Articl...

The C.P. of 20 articles is same as theS.P. of x articles.Article profit is 25%.Find x

Area, #What is an easy way to find the area of any figure

#What is an easy way to find the area of any figure

Determine series is convergent or divergent by root test, Find out if the f...

Find out if the following series is convergent or divergent. Solution There really is not very much to these problems another than calculating the limit and then usin

Arithmetic/Geometric Sequences and Binomial Expansion, Find the 35th term o...

Find the 35th term of the sequence in which a1 = -10 and the common difference is 4.

Word problems, Ana has hiked 4 1/2 miles. She is 2/3 of the way along the t...

Ana has hiked 4 1/2 miles. She is 2/3 of the way along the trail. How long is the trail?

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