Difference between revisions of "Value of information"
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- Value of information (VOI) in decision analysis is the amount a decision maker would be willing to pay for information prior to making a decision.[1]<section end=glossary />
Contents
Scope
How can value of information be calculated?
Definition
Input
To calculate value of information, you need
- a decision to be made,
- an outcome indicator to be optimised,
- an optimising function to be used as the criterion for the best decision,
- an uncertain variable of interest (optional, needed only if partial VOI is calculated for the variable)
Output
Value of information, i.e. the amount of money that the decision-maker is willing, in theory, to pay to obtain a piece of information.
Rationale
- See Decision theory and Value of information.
Result
VOI = E(Max(U(di,θ))) - Max(E(U(di,θ))),
where E=expectation over uncertain parameters θ, Max=maximum over decision options i, U=utility of decision d.
