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The value of information and the value of awareness

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  • John Quiggin

Abstract

Recent literature has examined the problem facing decision makers with bounded awareness, who may be unaware of some states of nature. A question that naturally arises here is whether a value of awareness (VOA), analogous to value of information (VOI), can be attributed to changes in awareness. In this paper, such a value is defined. It is shown that the sum VOA $$+$$ + VOI is constant and, except for scale effects, independent of the choice set. It follows that the larger is VOA, the smaller is VOI. This point is illustrated for a simple two-state case, then proved for general classes of compact convex choice sets, and for alternative interpretations of the concept of unawareness. Copyright Springer Science+Business Media New York 2016

Suggested Citation

  • John Quiggin, 2016. "The value of information and the value of awareness," Theory and Decision, Springer, vol. 80(2), pages 167-185, February.
    • Handle: RePEc:kap:theord:v:80:y:2016:i:2:p:167-185
    DOI: 10.1007/s11238-015-9496-x
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    References listed on IDEAS

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    1. Simon Grant & John Quiggin, 2013. "Inductive reasoning about unawareness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 717-755, November.
    2. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521785235, January.
    3. Heifetz, Aviad & Meier, Martin & Schipper, Burkhard C., 2006. "Interactive unawareness," Journal of Economic Theory, Elsevier, vol. 130(1), pages 78-94, September.
    4. Edi Karni & Marie-Louise Vier?, 2013. ""Reverse Bayesianism": A Choice-Based Theory of Growing Awareness," American Economic Review, American Economic Association, vol. 103(7), pages 2790-2810, December.
    5. Halpern, Joseph Y. & Rego, Leandro Chaves, 2008. "Interactive unawareness revisited," Games and Economic Behavior, Elsevier, vol. 62(1), pages 232-262, January.
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    Cited by:

    1. Fukuda, Satoshi, 2021. "Unawareness without AU Introspection," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    2. Grant Simon & Guerdjikova Ani & Quiggin John, 2021. "Ambiguity and Awareness: A Coherent Multiple Priors Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 21(2), pages 571-612, June.
    3. Siddiqi, Hammad, 2017. "Certain and uncertain utility: A new perspective on financial innovation," Economics Letters, Elsevier, vol. 158(C), pages 7-9.
    4. Ejaz, Nauman & Mallawaarachchi, Thilak, 2023. "Disparities in economic achievement across the rural–urban divide in Pakistan: Implications for development planning," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 487-512.
    5. Áron Tóbiás, 2023. "Cognitive limits and preferences for information," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 46(1), pages 221-253, June.
    6. T. D. Pol & S. Gabbert & H.-P. Weikard & E. C. Ierland & E. M. T. Hendrix, 2017. "A Minimax Regret Analysis of Flood Risk Management Strategies Under Climate Change Uncertainty and Emerging Information," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(4), pages 1087-1109, December.

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    More about this item

    Keywords

    Value of information; Awareness;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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