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Preference for Information

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Abstract

What is the relationship between an agent's attitude towards information, and her attitude towards risk? If an agent always prefers more information, does this imply that she obeys the independence axiom? We provide a substitution property on preferences that is equivalent to the agent (intrinsically) liking information in the absence of contingent choices. We use this property to explore both questions, first in general, then for recursive smooth preferences, and then in specific recursive non-expected utility models. Given smoothness, for both the rank dependence and betweenness models, if an agent is information-loving then her preferences can depart from Kreps and Porteus's (1978) temporal expected utility model in at most one stage. This result does not extend to quadratic utility. Finally, we give several conditions such that, provided the agent intrinsically likes information, Blackwell's (1953) result holds; that is, she will always prefer more informative signals, whether or not she can condition her subsequent behavior on the signal.

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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1114.

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Length: 44 pages
Date of creation: Jan 1996
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Publication status: Published in Journal of Economic Theory (1998), 83: 233-259
Handle: RePEc:cwl:cwldpp:1114

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  1. Chew, S H & Epstein, Larry G & Segal, U, 1991. "Mixture Symmetry and Quadratic Utility," Econometrica, Econometric Society, vol. 59(1), pages 139-63, January.
  2. Rakesh Sarin & Peter Wakker, 1994. "Folding Back in Decision Tree Analysis," Management Science, INFORMS, vol. 40(5), pages 625-628, May.
  3. Uzi Segal, 2000. "Two Stage Lotteries Without the Reduction Axiom," Levine's Working Paper Archive 7599, David K. Levine.
  4. Chew, Soo Hong & Ho, Joanna L, 1994. "Hope: An Empirical Study of Attitude toward the Timing of Uncertainty Resolution," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 267-88, May.
  5. Chew, Soo Hong & Epstein, Larry G, 1989. "The Structure of Preferences and Attitudes towards the Timing of the Resolution of Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 103-17, February.
  6. Kreps, David M & Porteus, Evan L, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Econometrica, Econometric Society, vol. 46(1), pages 185-200, January.
  7. Grant, Simon & Kajii, Atsushi & Polak, Ben, 1992. "Many good risks: An interpretation of multivariate risk and risk aversion without the Independence axiom," Journal of Economic Theory, Elsevier, vol. 56(2), pages 338-351, April.
  8. Chew, Soo Hong, 1983. "A Generalization of the Quasilinear Mean with Applications to the Measurement of Income Inequality and Decision Theory Resolving the Allais Paradox," Econometrica, Econometric Society, vol. 51(4), pages 1065-92, July.
  9. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, vol. 50(2), pages 277-323, March.
  10. Hong, Chew Soo & Nishimura, Naoko, 1992. "Differentiability, comparative statics, and non-expected utility preferences," Journal of Economic Theory, Elsevier, vol. 56(2), pages 294-312, April.
  11. Grant, Simon & Kajii, Atsushi & Polak, Ben, 1992. "Many good choice Axioms: When can many-good lotteries be treated as money lotteries?," Journal of Economic Theory, Elsevier, vol. 56(2), pages 313-337, April.
  12. Schmeidler, D. & Karni, E., 1990. "A Temporal Dynamic Consistency And Expected Utility Theory," Papers 39-90, Tel Aviv.
  13. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  14. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 263-86, April.
  15. Machina, Mark J., 1984. "Temporal risk and the nature of induced preferences," Journal of Economic Theory, Elsevier, vol. 33(2), pages 199-231, August.
  16. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
  17. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
  18. Machina, Mark J, 1987. "Choice under Uncertainty: Problems Solved and Unsolved," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 121-54, Summer.
  19. Kreps, David M. & Porteus, Evan L., 1979. "Temporal von neumann-morgenstern and induced preferences," Journal of Economic Theory, Elsevier, vol. 20(1), pages 81-109, February.
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Cited by:
  1. Edward SchleeE, 1997. "The sure thing principle and the value of information," Theory and Decision, Springer, vol. 42(1), pages 21-36, January.
  2. Simon Grant & Atsushi Kajii & Ben Polak, 1999. "Preference for Information and Dynamic Consistency," Cowles Foundation Discussion Papers 1208, Cowles Foundation for Research in Economics, Yale University.
  3. Alfred Müller & Marco Scarsini, 2002. "Even Risk-Averters may Love Risk," Theory and Decision, Springer, vol. 52(1), pages 81-99, February.
  4. Bruno Bassan & Olivier Gossner & Marco Scarsini & Shmuel Zamir, 2003. "Positive value of information in games," International Journal of Game Theory, Springer, vol. 32(1), pages 17-31, December.
  5. Hagen Lindstädt, 2007. "Valuing Others’ Information under Imperfect Expectations," Theory and Decision, Springer, vol. 62(4), pages 335-353, May.
  6. Botond Kőszegi, 2010. "Utility from anticipation and personal equilibrium," Economic Theory, Springer, vol. 44(3), pages 415-444, September.
  7. Ani Guerdjikova & Jürgen Eichberger, 2012. "Ambiguity, Data and Preferences for Information - A Case-Based Approach," THEMA Working Papers 2012-45 Classification-Je, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  8. Ali Lazrak, 2005. "Generalized stochastic differential utility and preference for information," Papers math/0503579, arXiv.org.

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