1. What is the EVPI Calculation Formula?

The Expected Value of Perfect Information (EVPI) is a decision analysis concept that measures the maximum amount a decision maker would be willing to pay for perfect information before making a decision.

2. How Does the Calculator Work?

The calculator uses the EVPI formula:

Where:

• \( p \) — Probability values (unitless)
• \( \max \) — Maximum values (dollars $)
• \( \text{payoff} \) — Payoff values (dollars $)
• \( EVPI \) — Expected Value of Perfect Information (dollars $)

Explanation: The formula calculates the difference between the expected value with perfect information and the expected value without perfect information.

3. Importance of EVPI Calculation

Details: EVPI helps decision makers determine whether additional information is worth acquiring before making important decisions, particularly in business, economics, and risk management contexts.

4. Using the Calculator

Tips: Enter comma-separated values for probabilities, maximum values, and payoff values. Ensure all arrays have the same number of elements and values are valid numbers.

5. Frequently Asked Questions (FAQ)

Q1: What does EVPI represent?
A: EVPI represents the maximum amount a decision maker should be willing to pay for perfect information before making a decision.

Q2: When is EVPI used?
A: EVPI is commonly used in decision analysis, risk management, and business strategy to evaluate the value of additional information.

Q3: What are the input requirements?
A: All input arrays must have the same number of elements, and values should be valid numerical entries.

Q4: Can EVPI be negative?
A: No, EVPI is always non-negative as it represents the value of information, which cannot have negative worth.

Q5: How is EVPI interpreted?
A: A higher EVPI indicates that perfect information is more valuable, while a lower EVPI suggests that current information is sufficient for decision making.