EVPI Calculator

Formula

The formula to calculate the Expected Value of Perfect Information (EVPI) is:

\[ EVPI = EUM - EMV \]

Where:

\(EVPI\) is the Expected Value of Perfect Information
\(EUM\) is the Expected Utility with Perfect Information
\(EMV\) is the Expected Monetary Value without Information

What is EVPI?

EVPI, or Expected Value of Perfect Information, is a concept in decision theory that calculates the maximum amount a decision-maker would be willing to pay for additional information before making a decision. It is the difference between the expected payoff with perfect information and the expected payoff under the current information. Essentially, it quantifies the value of having complete and perfect information when making a decision.

Example Calculation

Let's assume the following values:

Expected Utility with Perfect Information (EUM) = 100
Expected Monetary Value without Information (EMV) = 80

Using the formula to calculate the EVPI:

\[ EVPI = EUM - EMV = 100 - 80 = 20 \]

The Expected Value of Perfect Information (EVPI) is 20.