Difference between revisions of "Value of information"

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(Rationale: link to en:Expected value of perfect information added)
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===Rationale===
 
===Rationale===
  
* See [[:en:Decision theory|Decision theory]] and [[:en:Value of information|Value of information]].
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* See [[:en:Decision theory|Decision theory]], [[:en:Value of information|Value of information]], and [[:en:Expected value of perfect information|Expected value of perfect information]].
  
 
==Result==
 
==Result==

Revision as of 21:30, 20 February 2009


<section begin=glossary />
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 />

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

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.

Management

References