The Expected Opportunity Loss Calculator helps you make smart decisions under uncertainty by estimating the potential regret or missed value when choosing among several alternatives. In situations where outcomes depend on future events with known probabilities, this calculator quantifies what you may lose by not selecting the best option. It’s particularly useful in business strategy, project planning, and financial forecasting.
This tool does not just look at profit—it looks at what you could have gained under the best possible outcome for each scenario and compares that to your actual decision. The lower the expected opportunity loss, the better the decision.
formula of Expected Opportunity Loss Calculator
The Expected Opportunity Loss (EOL) is calculated in three steps.
Step 1: Create a Payoff Table
Start with a payoff table that shows the outcomes for each decision across different possible states of nature.
| Decision Alternatives | State 1 (P₁) | State 2 (P₂) | State N (Pₙ) |
|---|---|---|---|
| Decision 1 (D₁) | Payoff₁₁ | Payoff₁₂ | Payoff₁N |
| Decision 2 (D₂) | Payoff₂₁ | Payoff₂₂ | Payoff₂N |
| Decision M (Dₘ) | Payoffₘ₁ | Payoffₘ₂ | PayoffₘN |
Each payoff value represents the profit, cost, or other outcome if that decision is chosen and that state of nature occurs.
Step 2: Compute Opportunity Loss
For each column (state), find the best possible payoff, then subtract each alternative’s payoff from it.
OLᵢⱼ = Max(Payoffⱼ) – Payoffᵢⱼ
This gives the Opportunity Loss Table:
| Decision Alternatives | OL₁₁ | OL₁₂ | OL₁N |
|---|---|---|---|
| Decision 1 (D₁) | OL₁₁ | OL₁₂ | OL₁N |
| Decision 2 (D₂) | OL₂₁ | OL₂₂ | OL₂N |
| Decision M (Dₘ) | OLₘ₁ | OLₘ₂ | OLₘN |
Step 3: Calculate EOL
Now, multiply each opportunity loss by the probability of that state, and sum across all states for each decision.
EOLᵢ = (P₁ * OLᵢ₁) + (P₂ * OLᵢ₂) + … + (Pₙ * OLᵢₙ)
Choose the decision with the smallest EOL, as it represents the minimum expected regret.
Table of Common Values
| Probability of Event | 1000 Max Payoff | 800 Payoff | Opportunity Loss | Weighted Loss |
|---|---|---|---|---|
| 0.3 | 1000 | 800 | 200 | 60 |
| 0.7 | 1000 | 950 | 50 | 35 |
This kind of table can help you quickly compare different decisions and understand which one minimizes regret.
Example of Expected Opportunity Loss Calculator
Suppose you have two marketing strategies and two possible market conditions:
Payoff Table:
| Decision | High Demand (P=0.6) | Low Demand (P=0.4) |
|---|---|---|
| Strategy A | 10000 | 2000 |
| Strategy B | 7000 | 3000 |
Step 1: Find Maximum Payoffs
High Demand: max is 10000
Low Demand: max is 3000
Step 2: Opportunity Loss Table
| Decision | OL (High) | OL (Low) |
|---|---|---|
| Strategy A | 0 | 1000 |
| Strategy B | 3000 | 0 |
Step 3: Calculate EOL
EOL for Strategy A = (0.6 * 0) + (0.4 * 1000) = 400
EOL for Strategy B = (0.6 * 3000) + (0.4 * 0) = 1800
Conclusion: Choose Strategy A, because it has a lower Expected Opportunity Loss.
Most Common FAQs
This is a decision analysis calculator within the probability and economics category.
It helps quantify the cost of not making the best decision. That’s key for risk-aware planning and avoiding regretful strategies.
Yes, when using this method, the best decision is the one with the smallest expected opportunity loss.