SciForums.com > Science > Physics & Math > Value of perfect information PDA View Full Version : Value of perfect information Post ReplyCreate New Thread hamirom04-27-10, 10:43 AMHi there I need the answer to the following: When is the value of perfect information equal to zero and is plausible than in this case information has zero value? Value of perfect information = Epected value that can be obtained with information - Expected value without information Also I need two expamles (2 states, 2 alternatives, probability 50%) so that in one example VPI for a risk averse decision maker is grater than for an risk neutral one, and for the second less. This should mean that the risk averse person would buy the information from the risk neutral one for his VPI Thank in advance for your help BenTheMan04-27-10, 06:30 PMWhen is the value of perfect information equal to zero and is plausible than in this case information has zero value? Value of perfect information = Epected value that can be obtained with information - Expected value without information Ummm...isn't this obvious? Value of perfect information = 0 Implies Epected value that can be obtained with information = Expected value without information I mean, suppose you are playing cards with an opponent, and a spy offers you information about his hand (i.e., perfect information). The spy should price the information so that you don't spend more on his tip than is currently in the pot (i.e. value to you is greater than or = 0). This information is useless (value to you = 0) if you already have your opponent beat, say you have a straight and he has a pair. Also I need two expamles (2 states, 2 alternatives, probability 50%) so that in one example VPI for a risk averse decision maker is grater than for an risk neutral one, and for the second less. To know this, I guess, you have to understand how to put a price on/quantify risk. This sounds like homework for a quantitative finance class... Pete04-27-10, 09:20 PMSay you're investing in Chinese grocery markets, and you're seeking out the price volatility for various goods. In the process of your enquiries regarding a particular item, someone offers to sell you a tape recording of Michael Jackson's last consultation with his doctor. You immediately realise that the VPI of this tape is zero, and reply "What's that got to do with the price of tea in China?" This should be in the economics forum. And for homework questions, you should really give some indication that you've put some effort in already - describe specifically what you do and don't understand about the process of answering the question. maridansoft04-28-10, 03:04 PMPhdmdm? :)))))) bwz? :)))))) maridansoft04-28-10, 03:11 PMAnyway in your example you should solve it mathematically . There is 2 possible answers, when all probabilities from the model Pk are 0, then there is no MDM problem and second when the Maximum aik is equal to ai*k at every point. For the second part of homework I still didn't find the answer. Will digg... PM me if something... Post ReplyCreate New Thread