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Decreasing Marginal Value of Information Under Symmetric Loss

Author

Listed:
  • Sushil Bikhchandani

    (Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095)

  • John W. Mamer

    (Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095)

Abstract

We investigate conditions under which the value of additional information is diminishing in a setting where the decision maker has access to multiple, identically-distributed, information signals. The signals are assumed to be independent conditional on an unknown payoff-relevant parameter. The decision maker minimizes a quadratic loss function. Quadratic losses arise in quality control, scoring rules, and other applications. We characterize two concepts of diminishing marginal value of information. The first is an ex ante concept, before any information is observed, and the second is an ex post concept, after observation of previous information signals. The former concept is useful for ex ante information acquisition decisions and the latter for sequential information acquisition.

Suggested Citation

  • Sushil Bikhchandani & John W. Mamer, 2013. "Decreasing Marginal Value of Information Under Symmetric Loss," Decision Analysis, INFORMS, vol. 10(3), pages 245-256, September.
    • Handle: RePEc:inm:ordeca:v:10:y:2013:i:3:p:245-256
    DOI: 10.1287/deca.2013.0274
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    References listed on IDEAS

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    Cited by:

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    5. De Jaegher, K. & Kamphorst, J.J.A., 2015. "Minimal two-way flow networks with small decay," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 217-239.

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