Hierarchical Planning of Project-Selection Problems with Information Purchasing

Abstract

A strategic planning approach is used to compute the value of sample information in a project-selection problem for a risk-neutral decision-maker. Under this setting, a three-stage procedure is developed, and the decisions of purchasing information and selecting projects are derived for different cases. An exact solution is computed for the case with no budget constraints. Formulations, exact procedures and heuristics are suggested for other cases. In addition, upper bounds are derived for the amount of money that the decision-maker will be willing to pay in each case.

Keywords:

• expected value of sample information
• integer programming
• project selection