Which of the following statements is TRUE of expected value of perfect information (EVPI)?
A) EVPI mostly applies to situations that require one-time decisions.
B) EVPI is a numerical value associated with a decision coupled with some event.
C) EVPI is calculated by adding the expected payoff under perfect information to the expected payoff of the optimal decision without perfect information.
D) EVPI can be computed by determining the best decision and payoff if each event occurs.

Question

Quizplus · Accepted Answer

EVPI is the difference between the expected value of the best decision with perfect information and the expected value of the best decision without perfect information. It can be computed by determining the expected payoff and best decision for each event. Therefore, option D is the correct statement about EVPI.

Which of the Following Statements Is TRUE of Expected Value