Revise probabilities in light of sample information by using Bayesian analysis and calculating the expected value of sample information.

Question

Quizplus · Accepted Answer

The Answer is By using Bayes' theorem,the probabilities associated with the states of nature in decision making under risk can be revised when new information is obtained.This information can be helpful to the decision maker.However,it usually carries a cost.This cost can reduce the payoff of decision making with sample information.The EMV with sample information can be compared with the EMV without it to determine the value of sample information.

Revise Probabilities in Light of Sample Information by Using Bayesian