1. What is Value of Information?

Value of Information (VOI) is an economic concept that quantifies the benefit of obtaining additional information before making a decision. It represents the maximum amount a decision-maker should be willing to pay for perfect information.

2. How Does the Calculator Work?

The calculator uses the Value of Information formula:

Where:

• \( EV_{with\ info} \) — Expected value with additional information
• \( EV_{without\ info} \) — Expected value without additional information
• \( VOI \) — Value of Information (the difference)

Explanation: The formula calculates the incremental value gained by having perfect information compared to making decisions under uncertainty.

3. Importance of VOI Calculation

Details: VOI analysis helps organizations determine whether investing in additional research, data collection, or market analysis is economically justified. It's widely used in healthcare, finance, and business strategy.

4. Using the Calculator

Tips: Enter both expected values in the same currency units. Positive VOI indicates that obtaining information is valuable, while negative VOI suggests it's not worth the cost.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive VOI indicate?
A: A positive VOI means that obtaining additional information would increase the expected value of your decision, making it potentially worthwhile to invest in gathering that information.

Q2: Can VOI be negative?
A: Yes, if EV_with_info is less than EV_without_info, VOI will be negative, indicating that the information would actually decrease expected value.

Q3: What types of decisions benefit from VOI analysis?
A: VOI is particularly useful for high-stakes decisions involving uncertainty, such as drug development, major investments, product launches, and strategic planning.

Q4: How accurate are the expected value estimates?
A: The accuracy depends on the quality of your probability and outcome estimates. VOI analysis is most valuable when there's significant uncertainty about key parameters.

Q5: Does VOI account for the cost of information?
A: This basic calculation gives you the gross value. You would subtract the actual cost of obtaining information to determine the net value.