Asked by ruben begazo on Jun 09, 2024
Verified
Which of the following statements is correct?
A) The EMV criterion selects the act with the largest expected monetary value.
B) The EOL criterion selects the act with the smallest expected opportunity loss.
C) The expected value of perfect information (EVPI) equals the smallest expected opportunity loss.
D) All of these choices are true.
Expected Opportunity Loss
The anticipated loss for not choosing the best possible option or course of action in decision-making processes.
Expected Monetary Value
A statistical technique in decision making used to calculate the average outcome when the future includes scenarios that may or may not happen.
Expected Value
The long-run average value of repetitions of the experiment it represents, often considered as the mean in probability.
- Understand the concept of expected monetary value (EMV) and how it guides decision-making in uncertain conditions.
- Understand the definition and calculation of the expected opportunity loss (EOL) and its significance in decision analysis.
- Grasp the concept and calculation of the expected value of perfect information (EVPI) and its importance in decision-making.
Verified Answer
Learning Objectives
- Understand the concept of expected monetary value (EMV) and how it guides decision-making in uncertain conditions.
- Understand the definition and calculation of the expected opportunity loss (EOL) and its significance in decision analysis.
- Grasp the concept and calculation of the expected value of perfect information (EVPI) and its importance in decision-making.
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