Robert G. Chambers () (Dept of Agricultural and Resource Economics, University of Maryland, College Park) John Quiggin () (Department of Economics, University of Queensland)
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This paper has two goals. First,we demonstrate that standard arguments and methods from production and duality analysis can be used to provide a comprehensive and general treatment of the value of information for a risk-averse firm with expected-utility (linear-in-probabilities) preferences and a general stochastic technology. Second, we place bounds on the value of information for a risk-averse firm and relate these bounds to characteristics of the technology and the producer's preferences. A particularly striking observation that emerges from this representation is that the most common representation of production uncertainty corresponds to a polar case that trivializes the role that information can play in economic decisionmaking under risk.
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Paper provided by Risk and Sustainable Management Group, University of Queensland in its series Risk & Uncertainty Working Papers with number
WPR03_2.
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