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The Appeal of Information Transactions

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Abstract

An information transaction entails the purchase of information. Formally, it consists of an information structure together with a price. We develop an index of the appeal of information transactions, which is derived as a dual to the agent's preferences for information. The index of information transactions has a simple analytic characterization in terms of the relative entropy from priors to posteriors, and it also connects naturally with a recent index of riskiness.

Suggested Citation

  • Antonio Cabrales & Olivier Gossner & Roberto Serrano, 2012. "The Appeal of Information Transactions," Working Papers 2012-13, Brown University, Department of Economics.
  • Handle: RePEc:bro:econwp:2012-13
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    References listed on IDEAS

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    1. Susan Athey & Jonathan Levin, 1998. "The Value of Information In Monotone Decision Problems," Working papers 98-24, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Antonio Cabrales & Olivier Gossner & Roberto Serrano, 2013. "Entropy and the Value of Information for Investors," American Economic Review, American Economic Association, vol. 103(1), pages 360-377, February.
    3. Olivier Gossner, 2011. "Simple Bounds on the Value of a Reputation," Econometrica, Econometric Society, vol. 79(5), pages 1627-1641, September.
    4. Sergiu Hart, 2011. "Comparing Risks by Acceptance and Rejection," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 617-638.
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    Cited by:

    1. Cabrales, Antonio & Gossner, Olivier & Serrano, Roberto, 2017. "A normalized value for information purchases," Journal of Economic Theory, Elsevier, vol. 170(C), pages 266-288.

    More about this item

    Keywords

    informativeness; information transactions; Kullback-Leibler di- vergence; relative entropy; decision under uncertainty; investment; Blackwell ordering.;

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G00 - Financial Economics - - General - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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