The difference between the expected payoff under perfect information and the maximum expected payoff under risk is
A) expected monetary value
B) economic order quantity
C) expected value of perfect information
D) PERT
E) expected monetary payoff

Question

Quizplus · Accepted Answer

The difference between the expected payoff under perfect information and the maximum expected payoff under risk is known as the expected value of perfect information (EVPI). It represents the maximum amount a decision-maker would be willing to pay to acquire additional information that would eliminate all uncertainty. Therefore, option C, expected value of perfect information, is the best choice. The other options are not related to the concept of EVPI.

The Difference Between the Expected Payoff Under Perfect Information and the Maximum