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- VALUE OF PERFECT INFORMATION
-
- IN THE SCENARIO TO THIS PROGRAM THERE ARE SEVERAL
- POSSIBLE STATES OF NATURE, ONE OF WHICH IS THE TRUE STATE.
- WE DO NOT KNOW WHAT THE TRUE STATE OF NATURE(S OF N) IS BUT
- WE KNOW THE PROBABILITY OF OCCURRENCE OF EACH S OF N.
- IN ADDITION THERE ARE SEVERAL ALTERNATIVE ACTIONS WE MAY TAKE
- EACH OF WHICH HAS A CERTAIN EXPECTED VALUE(OR AVERAGE RETURN).
- EXPECTATION THEORY SAYS TO CHOOSE THE ACTION WITH THE HIGHEST
- EXPECTED VALUE. IF WE KNEW WHAT THE TRUE STATE OF NATURE WAS
- THEN WE WOULD KNOW WHAT ACTION TO TAKE. THE EXPECTED VALUE OF
- PERFECT INFORMATION IS THE EXPECTED VALUE OF DECISIONS WITH
- KNOWLEDGE OF THE S OF N MINUS THE MAXIMUM EXPECTED VALUE OF
- ACTIONS WITHOUT THIS KNOWLEDGE.
-
- PRESS ENTER TO CONTINUE?
- IN THIS PROGRAM THERE ARE UP TO 25 S OF N'S AND 8 POSSIBLE
- ACTIONS. THE MAXIMUM EXPECTED VALUE OF THESE ACTIONS IS
- COMPUTED. THEN THE EXPECTED VALUE WITH PERFECT INFORMATION
- ABOUT THE S OF N IS COMPUTED. THEIR DIFFERENCE IS THE EVPI.
-
- PRESS ENTER TO BEGIN?
- ENTER NUMBER OF POSSIBLE STATES OF NATURE? 2
-
- ENTER PROBABILITY OF S OF N 1 ? 111
- ENTER PROBABILITY OF S OF N 2 ? 222
-
- PROBABILITIES DO NOT SUM TO 1.
- ENTER 1 TO STANDARDIZE,0 TO BEGIN OVER? 1
-
- ENTER NUMBER OF POSSIBLE DECISIONS(<=8)? 2
-
- DECISION 1
- PAYOFF WHEN S OF N IS 1 ? 123
- PAYOFF WHEN S OF N IS 2 ? 456
-
- DECISION 2
- PAYOFF WHEN S OF N IS 1 ? 789
- PAYOFF WHEN S OF N IS 2 ? 395
- COMPUTING
- DECISION EXPECTED VALUE
- 1 345.00
- 2 526.33
-
- MAXIMUM EXPECTED VALUE = 526.333
-
- EVWPI = 567
- EXPECTED VALUE OF PERFECT INFORMATION = 40.6667
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