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

Find out the taylor series for f (x) = ex about x = 0, Find out the Taylor ...

Find out the Taylor Series for f (x) = e x about x = 0. Solution In fact this is one of the easier Taylor Series that we'll be asked to calculate.  To find out the Taylor

Polygon on a coordinate, a square tile measures 12 inches by 12 inches each...

a square tile measures 12 inches by 12 inches each unit on a coordinate grid represents 1 inch (1,1) and (1,13) are two of the coordinate of the tile drawn on the grid what are the

Calculate the area of circle, Calculate the area of CIRCLE ? A circle i...

Calculate the area of CIRCLE ? A circle is a set of all points that are at a given distance from a center point. The diameter (d) of a circle is the length of a line that goes

Series - convergence or divergence, Series - Convergence/Divergence In ...

Series - Convergence/Divergence In the earlier section we spent some time getting familiar with series and we briefly explained convergence and divergence.  Previous to worryin

What is the probability that they will both come to a party, Q.  Suppose th...

Q.  Suppose the probability of David coming to a party is 75% and the probability of Jason coming to a party is 85%. What is the probability that they will both come to a party, a

Directional derivatives, What are directional derivatives? Explain with two...

What are directional derivatives? Explain with two or more examples..

Solid mensuration, The two sides of a triangle are 17 cm and 28 cm long, an...

The two sides of a triangle are 17 cm and 28 cm long, and the length of the median drawn to the third side is equal to 19.5 cm. Find the distance from an endpoint of this median to

Math, to which subset of the real number does the number 22 belong?

to which subset of the real number does the number 22 belong?

.gradient, Draw the graph of y=x^2-4x from x=-1 to x=5.use the scale of 2cm...

Draw the graph of y=x^2-4x from x=-1 to x=5.use the scale of 2cm on the x axis and 1cm on the y axis.Estimate the gradient at point:x=4, x=2 and x=0

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