Assume that a decision maker is facing a decision under uncertainty and has calculated the expected value of perfect information is 75.If the decision maker could obtain perfect information at a cost of 85,then he/she should purchase the perfect information.

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Quizplus · Accepted Answer

The expected value of perfect information (EVPI) represents the maximum amount a decision maker should be willing to pay for perfect information. In this scenario, the EVPI is 75, which means the decision maker is willing to pay up to 75 for perfect information. However, if the cost of obtaining perfect information is 85, then it is not worth purchasing it as the cost is higher than the potential benefit (EVPI). Therefore, the decision maker should not purchase perfect information in this scenario.

Assume That a Decision Maker Is Facing a Decision Under