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

Prove that sinx+cosx=? , Multiply and divide by root2, then root2/root2...

Multiply and divide by root2, then root2/root2(sinx+cosx) = root2(sinx/root2 + cosx/root2) = root2(sinx cos45+cosx sin45) = root2(sin(x+45))

What is the maximum volume of rectangular box, 1. A rectangular piece of ca...

1. A rectangular piece of cardboard measuring 26 inches by 42 inches is to be made into a box with an open top by cutting equal size squares from each comer and folding up the side

Find the number of vertices in graph, A graph G has 21 Edges, 3 vertices of...

A graph G has 21 Edges, 3 vertices of degree 4 and other vertices are of degree 3. Find the number of vertices in G.   Ans: It is specified that graph G has 21 edges, so total

Fractions, if you have 1/5 of a candy bar and 4 friends how much will they ...

if you have 1/5 of a candy bar and 4 friends how much will they get

Large samples, LARGE SAMPLES These are samples that have a sample size ...

LARGE SAMPLES These are samples that have a sample size greater than 30(that is n>30) (a)   Estimation of population mean Here we suppose that if we take a large sample

Unit Rates, I need help on how to do real word problm with unit rates.

I need help on how to do real word problm with unit rates.

How many different combinations could she form these item, Wendy has 5 pair...

Wendy has 5 pairs of pants and 8 shirts. How many different combinations could she form with these items? Multiply the number of choices for each item to find out the number of

Calculate the number-average and weight-average molar mass, Three mixtures ...

Three mixtures were prepared with very narrow molar mass distribution polyisoprene samples with molar masses of 8000, 25,000, and 100,000 as indicated below. (a) Equal numbers o

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