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 the limit of given matrix, What is required: This assignment is to be ...

What is required: This assignment is to be resolved using Maple. You are to upload a single Maple worksheet with file name FamilynameFirstname.mw (e.g., CarrElliot.mw), using the A

What is the total balance of an account after 18 months, A certain bank pay...

A certain bank pays 3.4% interest per year for a certificate of deposit, or CD. What is the total balance of an account after 18 months along with an initial deposit of $1,250?

Explain comparing fractions with example, Explain Comparing Fractions with ...

Explain Comparing Fractions with example? If fractions are not equivalent, how do you figure out which one is larger? Comparing fractions involves finding the least common

Modi method, why modi method is used in operation research

why modi method is used in operation research

Calculus, the limit of f(x) as x approaches 5 is equal to 7. write the defi...

the limit of f(x) as x approaches 5 is equal to 7. write the definition of limit as it applies to f at this point

Sequence-or-series, in and ap 1,2,3,4,5,6,7,8,9 11,12,13,14,15,16,17,18,19...

in and ap 1,2,3,4,5,6,7,8,9 11,12,13,14,15,16,17,18,19 and like that nonzzero digit find tn Solution) First break the ''n'' number in terms of 10''s power. For e.g if n=3259 wri

Statistics quiz.., can someone help me with a statistics quiz?

can someone help me with a statistics quiz?

Vectors, A triangle has vertices A (-1, 3, 4) B (3, -1, 1) and C (5, 1, 1)....

A triangle has vertices A (-1, 3, 4) B (3, -1, 1) and C (5, 1, 1). The area of ABC is a) 30.1 b) 82.1 c) 9.1 d) 52.1

.., rectangles 7cm by 4cm

rectangles 7cm by 4cm

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