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

Kyla, hi i am doing the oaks test do you have somthing that could help me

hi i am doing the oaks test do you have somthing that could help me

Question, What is a marketing plan

What is a marketing plan

What is congruent angles in parallel lines, What is Congruent Angles in Par...

What is Congruent Angles in Parallel Lines ? Postulate 4.1 (The Parallel Postulate) Through a given point not on a line there is exactly one line parallel to the line. T

Example on discrete mathematics, Suppose that at some future time every tel...

Suppose that at some future time every telephone in the world is assigned a number that contains a country code, 1 to 3 digits long, that is, of the form X, XX , XXX or followed

Word problem, Twins Olivia and Chelsea and their friend Rylee were celebrat...

Twins Olivia and Chelsea and their friend Rylee were celebrating their fourteenth birthdays with a party at the beach. The first fun activity was water games. As Nicole arrived, sh

Marginal cost & cost function, Marginal cost & cost function  The cost ...

Marginal cost & cost function  The cost to produce an additional item is called the marginal cost and as we've illustrated in the above example the marginal cost is approxima

Progressions, The sum of the series 1+1/2+1/4,..is

The sum of the series 1+1/2+1/4,..is

Discontinuous integrand- integration techniques, Discontinuous Integrand- I...

Discontinuous Integrand- Integration Techniques Here now we need to look at the second type of improper integrals that we will be looking at in this section.  These are integr

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