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

Concepts, what are core concepts of marketing?

what are core concepts of marketing?

Mensuration, if area of a rectangle is 27 sqmtr and it perimeter is 24 m fi...

if area of a rectangle is 27 sqmtr and it perimeter is 24 m find the length and breath#

Polya’s first and second principle:-mathematical problem, Mathematical Prob...

Mathematical Problem Solving In 1945, mathematician George Polya (1887-1985) published a book titled How To Solve It in which he demonstrated his approach to solving problems.

Compute the total and annual return on the investment, 1. Calculate the ann...

1. Calculate the annual interest that you will receive on the described bond-A $500 Treasury bond with a current yield of 4 .2% that is quoted at 106 points? 2. Compute the tota

Integration, Awhat is the meaning and application sk question #Minimum 100 ...

Awhat is the meaning and application sk question #Minimum 100 words accepted#

Coefficients of the equation, If coefficients of the equation ax 2 + bx + ...

If coefficients of the equation ax 2 + bx + c = 0, a ¹ 0 are real and roots of the equation are non-real complex and  a + c (A) 4a + c > 2b (B) 4a + c Please give t

How to find total no. of unordered pairs , How to find total no. of unorder...

How to find total no. of unordered pairs of disjoint subsets of a finite set? Solution) Suppose A and B are two such disjoint subsets of the set S. Then every element can go into

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