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The value of information under unawareness

Spyros Galanis

Journal of Economic Theory, 2015, vol. 157, issue C, 384-396

Abstract: The value of information is examined in a single-agent environment with unawareness. Although the agent has a correct prior about events he is aware of and has a clear understanding of his available actions and payoffs, his unawareness may lead him to commit information processing errors and to behave suboptimally. As a result, the value of information can be negative, contrasting what is true in the standard model with partitional information and no unawareness. We show that the source of the agent's suboptimal behavior is that he misunderstands the information revealed by his varying awareness, treating it asymmetrically.

Keywords: Unawareness; Value of information; Uncertainty; Knowledge; Bounded perception; Awareness (search for similar items in EconPapers)
JEL-codes: C70 D01 D80 D82 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:157:y:2015:i:c:p:384-396

DOI: 10.1016/j.jet.2015.01.015

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