Valuing Othersâ€™ Information under Imperfect Expectations
Sometimes we believe that others receive harmful information. However, Marschakâ€™s value of information framework always assigns non-negative value under expected utility: it starts from the decision makerâ€™s beliefs â€“ and one can never anticipate informationâ€™s harmfulness for oneself. The impact of decision makersâ€™ capabilities to process information and of their expectations remains hidden behind the individual and subjective perspective Marschakâ€™s framework assumes. By introducing a second decision maker as a point of reference, this paper introduces a way for evaluating othersâ€™ information from a cross-individual, imperfect expectations perspective for agents maximising expected utility. We define the cross-value of information that can become negative â€“ then the information is â€œharmfulâ€\x9D from a cross-individual perspective â€“ and we define (mutual) cost of limited information processing capabilities and imperfect expectations as an opportunity cost from this same point of reference. The simple relationship between these two expected utility-based concepts and Marschakâ€™s framework is shown, and we discuss evaluating short-term reactions of stock market prices to new information as an important domain of valuing othersâ€™ information. Copyright Springer Science+Business Media, LLC 2007
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 62 (2007)
Issue (Month): 4 (May)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/economic+theory/journal/11238/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grant, S. & Polak, B. & Kajii, A., 1996.
"Preference for Information,"
298, Australian National University - Department of Economics.
- Simon Grant & Atsushi Kajii & Ben Polak, 1996. "Preference for Information," Cowles Foundation Discussion Papers 1114, Cowles Foundation for Research in Economics, Yale University.
- Lipman, Barton L, 1991. "How to Decide How to Decide How to. . . : Modeling Limited Rationality," Econometrica, Econometric Society, vol. 59(4), pages 1105-1125, July.
- Jacob Marschak, 1959. "Efficient and Viable Organizational Forms," Cowles Foundation Discussion Papers 65, Cowles Foundation for Research in Economics, Yale University.
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
- Hagen LINDSTÃ„DT, 2001. "More nonconcavities in information processing functions," Theory and Decision, Springer, vol. 51(2), pages 351-365, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:theord:v:62:y:2007:i:4:p:335-353. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.