Expected Value of Perfect Information, EVPI Perfect information corresponds to knowledge of which state of nature will arise To determine the expected value of perfect information: Determine which action will be chosen if only the prior probabilities P(s 1 ), P(s 2 ),..., P(s H ) are used For each possible state of nature, s i, find the difference, W i, between the payoff for the best choice of action, if it were known that state would arise, and the payoff for the action chosen if only prior probabilities are used This is the value of perfect information, when it is known that s i will occur Copyright © 2010 Pearson Education, Inc.
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