Glossary Entry

Expected Value

The average outcome you would expect from a decision after weighting each possible result by its probability.

Decision Making Optimization

Also called: EV, expected-value

Seed source: Wikipedia

Expected value is a way to compare uncertain choices. Instead of only asking what could happen, it asks how valuable each outcome is and how likely that outcome is.

In pricing, a simple expected-value calculation might multiply the probability a customer accepts an offer by the revenue from that offer. This turns a probability estimate into a decision score.