The Economics of Decision Making
Technical rept. 1 May 1973-31 Aug 1974
STANFORD UNIV CA DEPT OF ENGINEERING ECONOMIC SYSTEMS
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This paper addresses the class of decision problems where the value function is approximately quadratic in both decision and state variables. The main result is that the value of an experiment depends only on the prior variance of the posterior mean. This is a tremendous simplification over the general case where the value of information depends on the prior probability distribution of the posterior probability distribution.
- Administration and Management
- Operations Research