In decision analysis, the expected value of perfect information is calculated as _______

The correct answer is Expected payoff with perfect information minus expected payoff without experimentation.

Key Points In decision analysis, the Expected Value of Sample Information (EVSI) is calculated as the difference between the expected payoff with perfect information (E[P|I]) and the expected payoff without experimentation or additional information (E[P]).

Mathematically, the calculation of EVSI is expressed as:

EVSI = E[P|I] - E[P]

where:

• E[P|I] is the expected payoff or value of the decision made with the additional information obtained through experimentation or sampling, and
• E[P] is the expected payoff or value of the decision made without the additional information.

EVSI represents the potential value gained by conducting experimentation or obtaining additional information before making a decision. It quantifies the expected benefit of reducing uncertainty through sampling or experimentation and provides insights into the value of information in improving decision-making outcomes.