Value of information

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Value of information (VOI) in decision analysis is the amount a decision maker would be willing to pay for information prior to making a decision.<section end=glossary />

Scope

How can value of information be calculated?

Definition

Input

To calculate value of information, you need

• a decision to be made,
• an outcome indicator to be optimised,
• an optimising function to be used as the criterion for the best decision,
• an uncertain variable of interest (optional, needed only if partial VOI is calculated for the variable)

Output

Value of information, i.e. the amount of money that the decision-maker is willing, in theory, to pay to obtain a piece of information.

Rationale

• See Decision theory, Value of information, and Expected value of perfect information.

Result

VOI = E(Max(U(di,θ))) - Max(E(U(di,θ))), 

where E=expectation over uncertain parameters θ, Max=maximum over decision options i, U=utility of decision d.

Management

• Analytica file for calculating value of information