CONCEPT EXTENSIONS

 

CE - DOMINANCE

Lottery L is CE-Dominated by alternative action set {A1, ... , An} if
 CE(L) < MAXi ( CE ( Ai) ) for all positive risk tolerances
CE dominance chart

 A2 is CE-dominated by A1 and also by A3

 A2 is CE-dominated by {A1, A3}

 

CERTAIN EQUIVALENT VALUE OF PERFECT INFORMATION

CEVPI formula
CEVPI chart

In this definition, CE given perfect information is computed assuming the information is FREE. Hence CEVPI is the rise in cash value attendant upon having access to the perfect information BEFORE making the decision at hand. Notice that the peak CEVPI value is about 1.5 times the value of EVPI in this case.

 

CERTAIN EQUIVALENT VALUE OF SAMPLE INFORMATION

CEVSI formula

CEVSI chart

In this definition, CE given sample information is computed assuming the information is FREE. Hence CEVSI is the rise in cash value attendant upon having access to the sample information BEFORE making the decision at hand. Notice that the peak CEVSI value is about 5.5 times the value of EVSI in this case.