STAT 203 Lecture Notes - Lecture 3: Expected Value Of Perfect Information, Collectively Exhaustive Events
Document Summary
Earlier we discussed the concept of the expected value of the perfect information. Although perfect information about the future is rare, it is often possible to gain some amount of additional (imperfect) information that nevertheless will improve decisions. In this lesson we will present a process for using additional information in the decision-making by applying bayesian analysis. This process will be demonstrated by the same real estate example, but first we will remind some important statistical formulae: The conditional probability (a given b) is the probability of event a occurring, given that. 2 kb (two events are called mutually exclusive if both the events cannot occur. A set of events is collectively exhaustive if one of the events must occur. ) The probability of event ib given that event a has occurred is given by the formula. 1 are mutually exclusive and collectively exhaustive events. Let us return to the real estate example.
