A Use of a Mathematical Model in Updating Concept Selection

Abstract

This paper presents the use of a mathematical model in updating a decision maker’s belief before selecting a product/system concept and demonstrates a procedure to calculate the maximum monetary value of such a model in terms of the expected value of information. Acquiring information about uncertainty and updating belief according to the new information is an important step in concept selection. However, obtaining additional information can be considered beneficial only if the acquisition cost is less than the benefit. In this paper, a mathematical model is used as an information source that predicts outcomes of an uncertainty. The prediction, however, is imperfect information because the model is constructed based on simplifying assumptions. Thus, the expected value of imperfect information needs to be calculated in order to evaluate the tradeoff between the accuracy and the cost of model prediction (information). The construction and analysis of a mathematical model, the calculation of the expected value of information (model prediction) and updating the belief based on the model prediction are illustrated using a concept selection for a public project.