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The Appeal of Information Transactions

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  • Antonio Cabrales

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  • Olivier Gossner

    ()

  • Roberto Serrano

    ()

Abstract

An information transaction entails the purchase of information. Formally, it consists of an information structure together with a price. We develop an index of the appeal of information transactions, which is derived as a dual to the agent’s preferences for information. The index of information transactions has a simple analytic characterization in terms of the relative entropy from priors to posteriors, and it also connects naturally with a recent index of riskiness.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1224.

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Date of creation: Sep 2012
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Handle: RePEc:cte:werepe:we1224

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Keywords: Informativeness; Information transactions; Kullback-Leibler divergence ; Relative entropy; Decision under uncertainty ; Investment; Blackwell ordering;

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  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. Susan Athey & Jonathan Levin, 1998. "The Value of Information In Monotone Decision Problems," Working papers 98-24, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Sergiu Hart, 2010. "Comparing Risks by Acceptance and Rejection," Discussion Paper Series dp531, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  4. Olivier Gossner, 2011. "Simple Bounds on the Value of a Reputation," Econometrica, Econometric Society, vol. 79(5), pages 1627-1641, 09.
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