States of Nature Probabilities 3100 3400 12500 12400 15400

States of Nature / Probabilities

3,100

3,400

12,500

12,400

15,400

What is the expected value of perfect information?

States of Nature / Probabilities

Decisions	S1 .20	S2 .10	S3 .70
D1	10,000	-5,000	15,000
D2	15,000	9,000	10,000
D3	20,000	-5,000	10,000
D4	11,000	-4,000	10,000


Answers:	3,100
	3,400
	12,500
	12,400
	15,400

Let us prepare table neatly as follows:

Thus we get expected value = 45000

Hence none of the above

Decisions	S1	S2	S3
p	0.2	0.1	0.7	1

D1	10000	5000	15000	30000

D2	15000	9000	10000	34000

D3	20000	5000	10000	35000

D4	11000	4000	10000	25000

Total	56000	23000	45000	124000

p*freq	11200	2300	31500	45000

States of Nature / Probabilities 3,100 3,400 12,500 12,400 15,400 What is the expected value of perfect information? States of Nature / Probabilities Decisions

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