1. Expected values for Perfect Information

2. Website for information is as follows: http://en.wikipedia.org/wiki/Expected_valu e_of_perfect_informationhttp://en.wikipedia.org/wiki/Expected_valu e_of_perfect_information We will now use our classroom example to compute based on the above note next.

3. Formulae EVPI = A – B A = expected value with perfect information B = expected value without perfect information

4. example Consider our lecture example:

5. Calculation of A value A = the best of each outcome x their prob. The best of outcomes: Best outcome = 100,000 30,000 A = 0.6 x 100,000 + 0.4 x 30,000 = 72,000

6. Calculation of B value B = we select the max value of each given below Outcome of each event The max value for all computed value = 44,000 0.6(50000) + 0.4 (30,000) = 42,000 0.6(100,000 -0.4(40,000) = 44,000 0.6(30,000) + 0.4(10,000) = 20,000

7. EVPI EVPI = A – B = 72,000 – 44,000 = 28,000

8. More examples! You can refer to the website provided for more example. We show these steps next:

9. 0.5 for increase0.3 for equal20% decrease Option 11,500300-800 Option 2900600-200 Option 3500 EVPI = A – B A = expected value with perfect information B = expected value without perfect information For A: The optimal values for each value are: 0.5 for increase0.3 for equal20% decrease Option 11,500300-800 Option 2900600-200 Option 3500 Max value : 1,500 600 500 Thus A = 0.5 x 1,500 + 0.3 x 600 + 0.2 x 500 = 1030 Consider:

10. For B: we compute the expected values for each column first, and then select the max as below: 0.5 for increase0.3 for equal20% decreaseMax value Option 11,500300-8000.5x1,500+0.3 x300+0.2x(- 800) = 680 Option 2900600-2000.5x900+0.3x6 00+0.2x(-200) = 590 Option 3500 0.5x500+0.3x5 00+0.2x500 = 500 Thus B = max of all max value of above = 680 EVPI = A – B = 1030 – 680 = 350

11. These steps also applied and worked for all examples shown in the tut as well. Good luck!