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

How many different words can be formed out from varanasi, Determine how man...

Determine how many different words can be formed out of the letters of the word VARANASI? Ans: 720 different words can be formed out of the letters of the word VARANASI.

Probability, julie has 3 hats and 5 scarves. How many ways can she wear a h...

julie has 3 hats and 5 scarves. How many ways can she wear a hat and a scarf?

Determine the price paid for a land, A parcel of land, value $250,000 is so...

A parcel of land, value $250,000 is sold to an investor who signs a contract agreeing to pay a deposit of $25,000 followed by equal quarterly payments for as long as necessary, wit

Laura paid $17 for jeans what was original price of jeans, Laura paid $17 f...

Laura paid $17 for a pair of jeans. The ticketed price was 20% off the original price plus the sign on the rack said, "Take an additional 15% off the ticketed price." What was the

Homotopy, prove same homotopy type is an equivalent relation

prove same homotopy type is an equivalent relation

Basic Mathematics, Distinguish between Mealy and Moore Machine? Construct a...

Distinguish between Mealy and Moore Machine? Construct a Mealy machine that can output EVEN or ODD According to the total no. of 1''''s encountered is even or odd.on..

North west corner method, What is the history of North west corner method i...

What is the history of North west corner method in transportation problem? Why there are only m+n-1 solution to the transportation problem?

Initial value problems, Write a Matlab function MyIVP that solves an initia...

Write a Matlab function MyIVP that solves an initial-value problem (IVP) for a system of ordinary differential equations (ODEs) of the form x ?(t) = f (t, x(t)), where f : R × Rn ?

Explain set intersection, Q. Explain Set Intersection? Ans. Set I...

Q. Explain Set Intersection? Ans. Set Intersection Suppose your school needs to know which students are taking both art and business this year. If A is the set of studen

Systems of differential equations, For this point we've only looked as solv...

For this point we've only looked as solving particular differential equations. Though, many "real life" situations are governed through a system of differential equations. See the

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