The expected value of perfect information (EVPI) is the
A) payoff for a decision made under perfect information.
B) payoff under minimum risk.
C) average expected payoff.
D) difference between the payoff under perfect information and the payoff under risk.
E) payoff for a decision made under maximum risk.

Question

Quizplus · Accepted Answer

The expected value of perfect information (EVPI) is the difference between the payoff under perfect information and the payoff under risk, and represents the maximum amount a decision maker should be willing to pay to obtain perfect information. Option A is incorrect because payoff for a decision made under perfect information is called the expected value with perfect information (EVwPI). Option B and E are incorrect because they relate to decision-making under minimum and maximum risk, respectively, which are not the same as the EVPI. Option C is incorrect because it refers to the average expected payoff, which is not the same as the EVPI.

The Expected Value of Perfect Information (EVPI) Is the