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Information and the Risk-Averse Firm

Author

Listed:
  • Robert G. Chambers

    (Dept of Agricultural and Resource Economics, University of Maryland, College Park)

  • John Quiggin

    (Department of Economics, University of Queensland)

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.

Suggested Citation

  • Robert G. Chambers & John Quiggin, "undated". "Information and the Risk-Averse Firm," Risk & Uncertainty Working Papers WPR03_2, Risk and Sustainable Management Group, University of Queensland.
    • Handle: RePEc:rsm:riskun:r03_2
    as

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    File URL: http://www.uq.edu.au/rsmg/WP/WPR03_2.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

    state-contingent production; value of information;

    JEL classification:

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

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