Information Density in Decision Analysis

Abstract

Information value has been proposed and used as a probabilistic sensitivity measure, the idea being that uncertain parameters having higher information value are precisely those to which an optimal decision is more sensitive. In this paper, we study the notion of information density as a graphical complement to information value analysis, one that augments an information value calculation with associated directions of information gain. We formally examine mathematical details absent from its earlier presentation that guarantee information density exists and is well posed and describe its relationship to alternate measures of information value. We present its application in the context of a realistic case study and discuss the associated insights.