Optimal decision making and the value of information in a time- dependent version of the cost-loss ratio situation

Abstract

The time-dependent situation is motivated by a decision maker who contemplates postponing the protect/do not protect decision in anticipation of obtaining more accurate forecasts at some later time (i.e., shorter lead time), but who also recognizes that the cost of protection will increase as lead time decreases. Imperfect categorical forecasts, calibrated according to past performance, constitute the information of primary interest. Optimal decisions are based on minimizing expected expense and the value of information is measured relative to the expected expense associated with climatological information. -from Authors