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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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Related research

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, 2010. "Entropy and the value of information for investors," Working Papers 2010-17, Brown University, Department of Economics.
  2. Sergiu Hart, 2011. "Comparing Risks by Acceptance and Rejection," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 617 - 638.
  3. 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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