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KMID : 0370220200640010001
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Yakhak Hoeji
2020 Volume.64 No. 1 p.1 ~ p.7
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Value of Information for Decision Making under Uncertainty
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Lim Eun-A
Kang Dae-Won
Shin Gyeong-Seon
Choi Sang-Eun
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Abstract
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The value of information (VOI) is the value of additional information, as a quantitative estimate which presentsthe result as a monetary value. The VOI helps to make decisions under uncertainty. The importance of VOI is growingdue to the increase of early market approval of new technologies. The theoretical framework of VOI is based on theBayesian decision theory. VOI analysis estimates the expected costs associated with making a wrong decision due touncertainty. This implies that a new information is more valuable when a VOI is large. There are parametric and nonparametricmethods to estimate VOIs and non-parametric methods are commonly used. To estimate VOI, a non-parametricmethod calculates the difference of potential values between decision with perfect information and decision underuncertainty. The decision to conduct a new research is made when the population VOI estimate is larger than the expectedcost of conducting the additional research. There are three key measurements in VOI. The expected value of perfectinformation (EVPI) is perfect information for the whole parameters, the expected value of perfect parameter information(EVPPI) is perfect information for a parameter or a set of parameters, and the expected value of sample information(EVSI) provides information of new study design. VOI analysis may require a lot of computational time but efficientsoftware programs have been introduced.
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KEYWORD
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Early economic evaluation, value of information, VOI, decision uncertainty, EVPI
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