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Information and the Risk-Averse Firm

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  • Chambers, Robert G.
  • Quiggin, John

Abstract

This paper has two 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. A particularly striking observation that emerges from this representation is that the most common representation of production uncertainty corresponds to a polar case that trivializes the role that information can play in economic decision making under risk.
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Suggested Citation

  • Chambers, Robert G. & Quiggin, John, 2001. "Information and the Risk-Averse Firm," Working Papers 197599, University of Maryland, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:umdrwp:197599
    DOI: 10.22004/ag.econ.197599
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    File URL: https://ageconsearch.umn.edu/record/197599/files/agecon-maryland-01-03.pdf
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    References listed on IDEAS

    as
    1. McFadden, Daniel, 1978. "Cost, Revenue, and Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.),Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 1, McMaster University Archive for the History of Economic Thought.
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    Cited by:

    1. John A. Miranowski & Bruce A. Babcock, 2004. "Genetic Information in Agricultural Productivity and Product Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 73-87.
    2. Robert Chambers, 2008. "Stochastic productivity measurement," Journal of Productivity Analysis, Springer, vol. 30(2), pages 107-120, October.
    3. Moez Abouda & Elyess Farhoud, 2010. "Anti-comonotone random variables and anti-monotone risk aversion," Post-Print halshs-00497444, HAL.
    4. Moez Abouda & Elyess Farhoud, 2010. "Risk aversion and Relationships in model-free," Post-Print halshs-00492170, HAL.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

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

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