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Information value and efficiency measurement for risk-averse firms

Author

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  • Robert Chambers

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  • John Quiggin

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Abstract

This paper has three 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. The third and final goal is to derive the implications that information differences can have for measured efficiency differences and to relate the bounds on the value of information to those measured differences. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Robert Chambers & John Quiggin, 2007. "Information value and efficiency measurement for risk-averse firms," Journal of Productivity Analysis, Springer, vol. 27(3), pages 197-208, June.
  • Handle: RePEc:kap:jproda:v:27:y:2007:i:3:p:197-208
    DOI: 10.1007/s11123-007-0038-6
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    File URL: http://hdl.handle.net/10.1007/s11123-007-0038-6
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    References listed on IDEAS

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    1. Eeckhoudt, Louis & Gollier, Christian, 1995. "Demand for Risky Assets and the Monotone Probability Ratio Order," Journal of Risk and Uncertainty, Springer, vol. 11(2), pages 113-122, September.
    2. C. J. O'Donnell & W. E. Griffiths, 2006. "Estimating State-Contingent Production Frontiers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 249-266.
    3. Ormiston, Michael B. & Schlee, Edward E., 1992. "Necessary conditions for comparative statics under uncertainty," Economics Letters, Elsevier, vol. 40(4), pages 429-434, December.
    4. Chambers, Christopher P. & Miller, Alan D., "undated". "Inefficiency," Working Papers WP2011/14, University of Haifa, Department of Economics, revised 30 Nov 2011.
    5. Susan Athey, 2002. "Monotone Comparative Statics under Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 187-223.
    6. Susan Athey & Jonathan Levin, 1998. "The Value of Information In Monotone Decision Problems," Working papers 98-24, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Ormiston Michael B. & Schlee Edward E., 1993. "Comparative Statics under Uncertainty for a Class of Economic Agents," Journal of Economic Theory, Elsevier, vol. 61(2), pages 412-422, December.
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    Citations

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    Cited by:

    1. Jean-Paul Chavas, 2012. "On learning and the economics of firm efficiency: a state-contingent approach," Journal of Productivity Analysis, Springer, vol. 38(1), pages 53-62, August.
    2. Adamson, David, 2012. "The 2011 Basin Plan, Climate Change and the Buy-Back," Risk and Sustainable Management Group Working Papers 149884, University of Queensland, School of Economics.

    More about this item

    Keywords

    Information value; Efficiency; Productivity; D81; D84; D24; D61;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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