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The Price for Information about Probabilities and its Relation with Capacities

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  • Attanasi, Giuseppe Marco
  • Montesano, Aldo

Abstract

In this paper ambiguity aversion is measured through the maximum price the decision maker is willing to pay in order to know the probability of an event. Two comparative problems are examined in which the decision maker faces an act: in one case buying information implies playing a lottery, while in the other case buying information gives also the option to avoid playing the lottery. In both decision settings, relying on Choquet expected utility model, we study how the decision maker’s risk and ambiguity attitudes affect the reservation price for information. These effects are analyzed for different levels of ambiguity of the act.

Suggested Citation

  • Attanasi, Giuseppe Marco & Montesano, Aldo, 2010. "The Price for Information about Probabilities and its Relation with Capacities," TSE Working Papers 10-193, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:23343
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    References listed on IDEAS

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    1. Arthur Snow, 2010. "Ambiguity and the value of information," Journal of Risk and Uncertainty, Springer, vol. 40(2), pages 133-145, April.
    2. Adam Dominiak & Wendelin Schnedler, 2011. "Attitudes toward uncertainty and randomization: an experimental study," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 289-312, October.
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    Keywords

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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