The value of information in anticipated utility theory

Research output: Contribution to journalArticle

26 Scopus citations

Abstract

A well-known property of expected utility theory is that the value of information is nonnegative. Given the widespread dissatisfaction with the expected utility hypothesis, a natural question to ask is whether competing theories of choice preserve this property. This article considers one widely discussed alternative to expected utility, anticipated utility theory. We show that, like expected utility, the anticipated value of perfect information is always nonnegative. The value of imperfect information, however, may be negative, though the precise valuation of information depends upon whether the reduction of compound lotteries axiom is used to derive the anticipated utility functional.

Original languageEnglish (US)
Pages (from-to)83-92
Number of pages10
JournalJournal of Risk and Uncertainty
Volume3
Issue number1
DOIs
StatePublished - Mar 1 1990
Externally publishedYes

Keywords

  • anticipated utility
  • expected utility
  • imperfect information
  • value of information

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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