Measuring the Value of Information in Multicriteria Decisionmaking

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Abstract:

Decisions in forestry typically include uncertainty. The decisionmaker then has two options: either to make the optimal choice between different alternative actions with the current information or to try to reduce the uncertainty by collecting more information. The value of information is due to the ability to make better decisions with new information. When the decisions only affect provision of goods that have market value, evaluation of alternative decisions is in principle a straightforward exercise of cost-benefit analysis. In sustainable forest management, however, multiple objectives typically exist, and these objectives may be related to provision of public goods and services. Because such goods and services cannot be directly measured in monetary terms, the problem of value of information is more complicated. The possible solutions are to assess the monetary value separately for all goods and services and evaluate the decisions with cost-benefit analysis or to evaluate the decisions in terms of utility with multicriteria analysis and calculate the (monetary) value of decisions based on these utilities. The aim of this study was to present these two cases for evaluating decisions and analyze their similarities and differences and to discuss the usefulness of these approaches in evaluating the value of information from different perspectives.

Keywords: Bayesian decision analysis; choice modeling; contingent valuation; multicriteria analysis

Document Type: Research Article

Publication date: December 1, 2010

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