The Value of Information
Value of information is a methodology that aims to determine whether it is worth acquiring new information. The acquisition of new data may reduce the uncertainties of the input parameters that define the value of a project. Such a reduction can increase our expectations and consequently the value of the project. The acquisition of data is justifiable only if their cost is less than the project value increases due to an increase in the certainty of the parameters. This article reviews the concepts and methodology of the value of information when the uncertainty is due to a lack of information and discusses an example of this methodology. A decision tree is built for the ideal perfect and imperfect information cases in the example shown and both results are contrasted. It is shown that, in the example discussed, it is worth acquiring the data if their cost is less than the calculated threshold. This article also introduces an additional form of uncertainty that occurs because of ambiguity and will be discussed in a future article.