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The value of a stochastic information structure

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  • Azrieli, Yaron
  • Lehrer, Ehud

Abstract

Upon observing a signal, a Bayesian decision maker updates her probability distribution over the state space, chooses an action, and receives a payoff that depends on the state and the action taken. An information structure determines the set of possible signals and the probability of each signal given a state. For a fixed decision problem, the value of an information structure is the maximal expected utility that the decision maker can get when the observed signals are governed by this structure. Thus, every decision problem induces a preference order over information structures according to their value. We characterize preference orders that can be obtained in this way. We also characterize the functions defined over information structures that measure their value.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 63 (2008)
Issue (Month): 2 (July)
Pages: 679-693

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Handle: RePEc:eee:gamebe:v:63:y:2008:i:2:p:679-693

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Web page: http://www.elsevier.com/locate/inca/622836

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  1. Itzhak Gilboa & Ehud Lehrer, 1989. "The Value of Information -- An Axiomatic Approach," Discussion Papers 835, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Eliaz, Kfir & Spiegler, Ran, 2006. "Can anticipatory feelings explain anomalous choices of information sources?," Games and Economic Behavior, Elsevier, vol. 56(1), pages 87-104, July.
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Cited by:
  1. Antonio Cabrales & Olivier Gossner & Roberto Serrano, 2011. "Entropy and the value of information for investors," Economics Working Papers we1104, Universidad Carlos III, Departamento de Economía.
  2. Eran Shmaya, 2006. "The Value of Information Structures in Zero-sum Games with Lack of Information on One Side," International Journal of Game Theory, Springer, vol. 34(2), pages 155-165, August.
  3. repec:hal:journl:halshs-00390625 is not listed on IDEAS
  4. repec:hal:wpaper:halshs-00648884 is not listed on IDEAS

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