Business Statistics

Chapter 19 | Statistical Decision Theory 743

So, the expected payoff with perfect information (EPPI) is the sum of all the

elements in the last column of Table 19.19.

Expected payoff with perfect information (EPPI) = 2500

Maximum expected payoff (EP) is the expected monetary value (EMV),

which is already computed as 1400 in Example 19.3.

Hence, expected value of perfect information (EVPI) = Expected payoff with

perfect information (EPPI) – Maximum expected payoff (EP) = 2500 – 1400

=1100

Here, it is interesting to observe that expected opportunity loss (EOL) = 1100

= expected value of perfect information (EVPI). Another interesting observation ...