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

6, 200000+500

200000+500

Probability., an insurance salesman sells policies to 5 men, all of identic...

an insurance salesman sells policies to 5 men, all of identical age in good health. the probability that a man of this particular age will be alive 30 years hence is 2/3.Find the p

Example of pythagorean theorem, Any 15 foot ladder is resting against the w...

Any 15 foot ladder is resting against the wall. The bottom is at first 10 feet away from the wall & is being pushed in the direction of the wall at a rate of 1 ft/sec. How rapid is

Linear Equations, Tommy has a Nexus 4 that charges poorly. He placed his ph...

Tommy has a Nexus 4 that charges poorly. He placed his phone to charge,after 20 minutes the phone was 27% and after 85 minutes the phone was at 66%. Find how many percentage the p

How many relations are possible from a set, How many relations are possible...

How many relations are possible from a set A of 'm' elements to another set B of 'n' elements?     Ans: A relation R from a set A to other set B is specified as any subset of A

Find the area of the shaded region of square, In the adjoining figure, ABCD...

In the adjoining figure, ABCD is a square of side 6cm.  Find the area of the shaded region. Ans:    From P draw PQ ⊥ AB AQ = QB = 3cm (Ans: 34.428 sq cm) Join PB

Which number falls among 5.56 and 5.81, Which number falls among 5.56 and 5...

Which number falls among 5.56 and 5.81? If you add a zero to the end of 5.6 to get 5.60, it is simpler to see that 5.56

Find out the interval of validity, Without solving, find out the interval o...

Without solving, find out the interval of validity for the subsequent initial value problem. (t 2 - 9) y' + 2y = In |20 - 4t|,   y(4) = -3 Solution First, in order to u

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