Enter the Expected Monetary Value with Perfect Information and the Expected Monetary Value without Perfect Information into the calculator to determine the Expected Value of Perfect Information. This calculator can also evaluate any of the variables given the others are known.
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EVPI Formula
The following formula is used to calculate the Expected Value of Perfect Information (EVPI).
EVPI = EVwPI - EMV
Variables:
- EVPI is the Expected Value of Perfect Information
- EVwPI is the Expected Monetary Value with Perfect Information
- EMV is the Expected Monetary Value without Perfect Information (i.e., under current information)
To calculate the EVPI, subtract the Expected Monetary Value without Perfect Information from the Expected Monetary Value with Perfect Information. This will give you the value of having perfect information in decision making.
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 perfect 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.
How to Calculate EVPI?
The following steps outline how to calculate the Expected Value of Perfect Information (EVPI).
- First, determine the Expected Monetary Value with Perfect Information (EVwPI).
- Next, determine the Expected Monetary Value without Perfect Information (EMV).
- Next, gather the formula from above = EVPI = EVwPI – EMV.
- Finally, calculate the Expected Value of Perfect Information (EVPI).
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Expected Monetary Value with Perfect Information (EVwPI) = 150
Expected Monetary Value without Perfect Information (EMV) = 120
