Carkod’s workplace

Decision theory: perfect information

Posted on: October 5, 2008

Perfect information

An individual with perfect information knows before the decision that a state of nature is going to happen, the best choice would be the maximum of each state of nature (each row ei), this is usually denoted by Mi. Afterwards, we calculate the expected value, under the name of expected value on perfect information (EVPI).From the previous example, we have:

And in order to find the value of perfect information just subtract expected value of perfect information to expected value of the decision (the ultimate decision).

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