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 language | English (US) |
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Pages (from-to) | 83-92 |
Number of pages | 10 |
Journal | Journal of Risk and Uncertainty |
Volume | 3 |
Issue number | 1 |
DOIs | |
State | Published - Mar 1 1990 |
Externally published | Yes |
Keywords
- anticipated utility
- expected utility
- imperfect information
- value of information
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics