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
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