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Entropy and the Value of Information for Investors: The Prior-FreeImplications

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  • Ran I. Shorrer

Abstract

Blackwell dominance is a partial order over information structures that is based on the uniform preference of all decision makers for one structure over another in all decision problems. I restrict attention to investment decision problems with ruin-averse investors (Cabrales, Gossner and Serrano, 2013), and compare substantive rejections of information transactions (uniform over all utilities and prior beliefs). This yields the partial order of prior-independent investment dominance, which strictly extends Blackwell's order. Thus, many pairs of information structures that are not ranked by the Blackwell criterion may still be ranked in investment problems independently of the prior.

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  • Ran I. Shorrer, 2015. "Entropy and the Value of Information for Investors: The Prior-FreeImplications," Working Paper 258061, Harvard University OpenScholar.
    • Handle: RePEc:qsh:wpaper:258061
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