Decreasing Marginal Value of Information Under Symmetric Loss

Sushil Bikhchandani and John W. Mamer ()
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John W. Mamer: Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095

Decision Analysis, 2013, vol. 10, issue 3, 245-256

Abstract: We investigate conditions under which the value of additional information is diminishing in a setting where the decision maker has access to multiple, identically-distributed, information signals. The signals are assumed to be independent conditional on an unknown payoff-relevant parameter. The decision maker minimizes a quadratic loss function. Quadratic losses arise in quality control, scoring rules, and other applications. We characterize two concepts of diminishing marginal value of information. The first is an ex ante concept, before any information is observed, and the second is an ex post concept, after observation of previous information signals. The former concept is useful for ex ante information acquisition decisions and the latter for sequential information acquisition.

Keywords: value of information; concavity of value of information; quadratic loss function; Bayesian models (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ordeca:v:10:y:2013:i:3:p:245-256

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