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A Theoretical and Empirical Approach to the Value of Information in Risky Markets


  • Antonovitz, Frances
  • Roe, Terry


The theory of the competitive firm under price uncertainty is used to develop a money metric of a producer's willingness to pay for additional information. This concept is extended to the market by formulating ex-ante and ex-post measures of the value of a rational expectations forecast. The empirical feasibility of these measures are demonstrated by application to a simple two equation model of an agricultural market.
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  • Antonovitz, Frances & Roe, Terry, 1986. "A Theoretical and Empirical Approach to the Value of Information in Risky Markets," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 105-114, February.
  • Handle: RePEc:tpr:restat:v:68:y:1986:i:1:p:105-14

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    References listed on IDEAS

    1. Freebairn, J W, 1976. "The Value and Distribution of the Benefits of Commodity Price Outlook Information," The Economic Record, The Economic Society of Australia, vol. 52(138), pages 199-212, June.
    2. David A. Bessler, 1980. "Aggregated Personalistic Beliefs on Yields of Selected Crops Estimated Using ARIMA Processes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 666-674.
    3. DeCanio, Stephen J, 1980. "Economic Losses from Forecasting Error in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 234-258, April.
    4. Rulon D. Pope, 1978. "The Expected Utility Hypothesis and Demand-Supply Restrictions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(4), pages 619-627.
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    Cited by:

    1. Burton, Diana M. & Love, H. Alan, 1996. "A Review of Alternative Expectations Regimes in Commodity Markets: Specification, Estimation, and Hypothesis Testing Using Structural Models," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(02), pages 213-231, October.
    2. Lee, Jung-Hee & Brorsen, B. Wade, 1994. "Effect Of Risk Aversion On Feeder Cattle Prices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(2), pages 1-7, December.
    3. Cherchye, L. & Post, G.T., 2001. "Methodological Advances in Dea," ERIM Report Series Research in Management ERS-2001-53-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    4. Catherine Morrison Paul, 2003. "Productivity and Efficiency Measurement in Our “New Economy”: Determinants, Interactions, and Policy Relevance," Journal of Productivity Analysis, Springer, vol. 19(2), pages 161-177, April.
    5. Moawia Alghalith, 2005. "Estimation with price and output uncertainty," Journal of Applied Economics, Universidad del CEMA, vol. 8, pages 247-257, November.
    6. Bullock, David S. & Garcia, Philip & Shin, Kie-Yup, 2005. "Measuring producer welfare under output price uncertainty and risk non-neutrality," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 1-21.
    7. Ates, Aaron M. & Lusk, Jayson L. & Brorsen, B. Wade, 2019. "Forecasting Meat Prices Using Consumer Expectations from the Food Demand Survey (FooDS)," Journal of Food Distribution Research, Food Distribution Research Society, vol. 50(1), March.
    8. Dennis W. Carlton & Jeffrey M. Perloff, 1989. "The Economics of Information," Food Marketing Policy Center Research Reports 005, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    9. Takii, Katsuya, 2000. "Prediction ability and investment under uncertainty," Economics Discussion Papers 9991, University of Essex, Department of Economics.
    10. Roe, Terry & Somwaru, Agapi & Diao, Xinshen, 2002. "Do direct payments have intertemporal effects on U.S. agriculture?," TMD discussion papers 104, International Food Policy Research Institute (IFPRI).
    11. Hennessy, David A. & Babcock, Bruce A., 1998. "Information, flexibility, and value added1," Information Economics and Policy, Elsevier, vol. 10(4), pages 431-449, December.
    12. Duncan, Steven Scott, 1988. "The relevant forecast of variance of income for marketing decisions under uncertainty," ISU General Staff Papers 198801010800009839, Iowa State University, Department of Economics.
    13. Caswell, Julie A. & Perloff, Jeffrey M., 1993. "Implications of New Industrial Organization and Demand Models for Marketing Research," Food and Agricultural Marketing Issues for the 21st Century - FAMC 1993 Conference 265924, Food and Agricultural Marketing Consortium (FAMC).
    14. Takii, Katsuya, 2007. "The value of adaptability--Through the analysis of a firm's prediction ability," Journal of Economics and Business, Elsevier, vol. 59(2), pages 144-162.
    15. Lei, Li-Fen, 1992. "Using futures and option contracts to manage price and quantity risk: A case of corn farmers in central Iowa," ISU General Staff Papers 1992010108000011326, Iowa State University, Department of Economics.
    16. Bullock, J. Bruce, 1986. "Risk of What?," Working Papers 256565, University of Missouri Columbia, Department of Agricultural Economics.
    17. repec:ags:jaecon:37108 is not listed on IDEAS
    18. Elie Appelbaum, 2000. "Estimating the firm's demand and supply functions under uncertainty without expected utility," Working Papers 2000_5, York University, Department of Economics.
    19. Pruitt, J. Ross & Tonsor, Glynn T. & Brooks, Kathleen R., 2014. "Eliciting Expert Opinion on Components of USDA Market Livestock Information," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169389, Agricultural and Applied Economics Association.

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