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The Value of Information In Monotone Decision Problems

  • Susan Athey
  • Jonathan Levin

February 2001 This paper studies decision problems under uncertainty where a decision-maker observes an imperfect signal about the true state of the world. We analyze the information preferences and information demand of such decision-makers, based on properties of their payoff functions. We restrict attention to "monotone decision problems," whereby the posterior beliefs induced by the signal can be ordered so that higher actions are chosen in response to higher signal realizations. Monotone decision problems are frequently encountered in economic modeling. We provide necessary and sufficient conditions for all decision makers with different classes of payoff functions to prefer one information structure to another. We also provide conditions under which two decision-makers in a given class can be ranked in terms of their marginal value for information and hence information demand. Applications and examples are given. Working Papers Index

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Paper provided by Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 98-24.

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Date of creation: Nov 1998
Date of revision:
Handle: RePEc:mit:worpap:98-24
Phone: (617) 253-3361
Fax: (617) 253-1330
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  1. Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Grant, Simon & Kajii, Atsushi & Polak, Ben, 1998. "Intrinsic Preference for Information," Journal of Economic Theory, Elsevier, vol. 83(2), pages 233-259, December.
  3. repec:cup:cbooks:9780521578967 is not listed on IDEAS
  4. Shannon, Chris, 1995. "Weak and Strong Monotone Comparative Statics," Economic Theory, Springer, vol. 5(2), pages 209-27, March.
  5. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  6. Nicola Persico, 1997. "Information Acquisition in Auctions," UCLA Economics Working Papers 762, UCLA Department of Economics.
  7. Athey, S., 1996. "Characterizing Properties of Stochastic Objective Functions," Working papers 96-1, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Athey, S, 1996. "Comparative Statics under Uncertainty : Single Crossing Properties and Log-Supermodularity," Working papers 96-22, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  10. repec:cup:cbooks:9780521570176 is not listed on IDEAS
  11. Larry G. Epstein & Stephen M. Tanny, 1980. "Increasing Generalized Correlation: A Definition and Some Economic Consequences," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 16-34, February.
  12. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
  13. Jewitt, Ian, 1986. "A note on comparative statics and stochastic dominance," Journal of Mathematical Economics, Elsevier, vol. 15(3), pages 249-254, June.
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