Discussion post (250 words) and 1 reply (150 words)
Explain why in decision analysis we are concerned with the “expected” value of information? (Please include at least 1 reference and in text citation)
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Reply post
Decision Analysis includes various factors, namely, actions, data, events, evaluation of results. The “expected” value can be determined as the average value of all the possible consequences. Expected value gives decision-makers an idea to understand the beneficial option and choose efficiently. Expected value recognized as expectation factor is termed as EV and considers all the results of the uncertain situation, helping in analyzing the scenario effectively contributing to desired outcomes.
An expected value provides calculative visualization of the effects of various parameters of the problems. It determines the financial value to analyze and choose based on the involved risks. The crucial step for the decision-maker when understanding the problem is to examine the required data and identify the type of study to be conducted in order to find a profitable solution. It is essential to know the value of certain data to consider and invest in, which in reality varies from time to time making it a risky and challenging element in the process of decision analysis. Expected Value directs towards estimation of different data, provide an average, and guides to shortlist the required data. It can be calculated based on the probability, occurrence of the events, and their value. Expected Value involves the concept of vulnerability. It provides a layout of the broad picture by giving the averages of all the variables, values assisting in the decision analysis process.
Expected Value interprets all components, uncertainties, risks, furnishing probable conclusions and further narrowing the choices contributing to better analysis. This makes the “expected” value of information a factor of concern in decision analysis.
REFERENCES:
Chick, S. E., Branke, J., & Schmidt, C. (2010). Sequential Sampling to Myopically Maximize the Expected Value of Information. INFORMS Journal on Computing, 22(1), 71–80. https://doi.org/10.1287/ijoc.1090.0327
Fenwick, E., Steuten, L., Knies, S., Ghabri, S., Basu, A., Murray, J. F., Koffijberg, H. (Erik), Strong, M., Sanders Schmidler, G. D., & Rothery, C. (2020). Value of Information Analysis for Research Decisions—An Introduction: Report 1 of the ISPOR Value of Information Analysis Emerging Good Practices Task Force. Value in Health, 23(2), 139–150. https://doi.org/10.1016/j.jval.2020.01.001
M. W. Merkhofer. (1977). The Value of Information Given Decision Flexibility. Management Science, 23(7), 716–727.
Terje Aven. (2008). Risk Analysis: Assessing Uncertainties Beyond Expected Values and Probabilities. Wiley.
