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1) Perfect Knowledge is where we are guaranteed Best Outcomes based on market research.
2) Imperfect Knowledge is where we are guaranteed Worst Outcomes at least based on market research.
Perfect Knowledge = (Best Outcomes x Probabilities) – EV
Imperfect Knowledge = (Worst Outcomes x Probabilities) – EVPlease correct me if I am wrong?
1. Perfect knowledge is where we are able to make the best decisions because we know in advance what the various outcomes will be.
2. Imperfect knowledge is where we are able to make better decisions because we know the various outcomes with a higher probability.
I work through examples of both perfect and imperfect knowledge in my free lectures on risk and uncertainty.
Don’t try and learn PM as just a set of rules. The questions asked by the examiner are designed to test your understanding of the topics rather than to test whether you have learned rules.
Sorry I realize what I wrote previously was wrong 🙁
1) Perfect Knowledge is calculated using the Best Outcomes (ie best decision) on each demand level from Profit Table with the probabilities given to calculate EV with Perfect information;
Demand———–400—–500—–700—–900
Best Outcome—4400—4600—5000—-5400
Probabilties——-0.2——0.3—–0.4——0.1
EV——————880—–1380—2000—-540 = $48002) Imperfect Knowledge = Perfect Knowledge – EV
This is the way you have done your calculation in your lecture If I am not wrong!
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