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References 245
are favorable or unfavorable. However, their methods are not
perfectly accurate and only have an estimated 75% probability of
giving a correct indication.
(a) Assuming that the road builders want to minimize expected
costs determine the expected value of the imperfect information
from their survey and interpret your result.
(b) If the geologists’ survey was certain to give a correct indication,
what would be the value of the information from the survey?
References
1. Spetzler, C. S. and Zamora, R. M. (1984) Decision Analysis of a Facilities
Investment and Expansion Problem, in R. A. Howard and J. E. Matheson
(eds) The Principles and Applications of Decision Analysis, Strategic Decision
Group, Menlo Park, CA.
2. Scanlon, S. (1976) Test Marketing: Calling the Shots more Closely, Portfolio
Sales and Marketing Management.
3. Schell, G. P. (1986) Establishing the Value of Information Systems, Interfaces,
16:3, 82–89.
4. Assmus, G. (1977) Bayesian Analysis for the Evaluation of Marketing Research
Expenditures, Journal of Marketing Research, 41, 562–568.
5. Lacava, G. J. and Tull, D. S. (1982) Determining the Expected Value of Information
for New Product Introduction, Omega, 10, No. 4, 383–389.