The Use and Value of Models in Decision Analysis

A normative approach to the use of models is presented in which modeling is viewed as a source of information. The value of modeling can then be interpreted from the value of information perspective. The expected value of modeling is defined as the increase in the expected value of the outcome that results from the use of the model-supplied information. With this definition the value of modeling is characterized under a variety of conditions. From a practical point of view the most useful result is that, under certain conditions, the expected value of modeling is maximum when the prior expectations of the value of the outcome for each alternative are equal.