Information in two‐stage programming under uncertainty

David P. Baron

Naval Research Logistics Quarterly, 1971, vol. 18, issue 2, 169-176

Abstract: The random variables in two‐stage programming under uncertainty are generally treated in a passive manner in that no information regarding the random variables or the process generating the random variables may be obtained. This paper develops the economics of information for the case in which the probability distributions are discrete. A multinomial process is assumed to generate the random variables, and the parameter vector of that process is assumed to be unknown. A Dirichlet prior distribution on the parameter vector is used, and the computation of the value of information thus involves a Dirichlet‐multinomial distribution on the random variables. An example involving producing to meet uncertain demands is presented.

Date: 1971
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https://doi.org/10.1002/nav.3800180204

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Persistent link: https://EconPapers.repec.org/RePEc:wly:navlog:v:18:y:1971:i:2:p:169-176

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