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

GCF, Find the GCF of 70 and 112

Find the GCF of 70 and 112

Determine y' for xy = 1 by implicit differentiation, Determine y′ for xy = ...

Determine y′ for xy = 1 . Solution : There are in fact two solution methods for this problem. Solution 1: It is the simple way of doing the problem.  Just solve for y to

What is the cost per ounce of detergent, A 64-ounce bottle of detergent cos...

A 64-ounce bottle of detergent costs $3.20. What is the cost per ounce of detergent? To ?nd out the cost per ounce, divide the cost through the number of ounces; $3.20 ÷ 64 =

Solving algebraic word problems, Solving Algebraic Word Problems: What...

Solving Algebraic Word Problems: What are the capacities of two water storage tanks in a nuclear facility if one holds 9 gallons less than three times another, and their whole

Shortcomng methods for teaching hto in maths, 1.What are the strengths and ...

1.What are the strengths and shortcomings of the methods of teaching H T 0 in Examples 1 and 2? 2. a) Think of another activity for getting children to practise H T 0, especia

Mensuration, In an equilateral triangle 3 coins of radius 1cm each are kept...

In an equilateral triangle 3 coins of radius 1cm each are kept along such that they touch each other and also the side of the triangle. Determine the side and area of the triangle.

Piecewise, x=±4, if -2 = y =0 x=±2, if -2 = y = 0

x=±4, if -2 = y =0 x=±2, if -2 = y = 0

Operations with rational numbers, larry spends 3/4 hours twice a day walkin...

larry spends 3/4 hours twice a day walking and playing with his dog. He spends 1/6 hours twice a day feeding his dog. how much time does larry spend on his dog each day?

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