The Logarithmic Investor's Decision to Acquire Costly Information

James R. Morris
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James R. Morris: The Wharton School, The University of Pennsylvania

Management Science, 1974, vol. 21, issue 4, 383-391

Abstract: This paper explores the relationship between the decision to purchase a costly information system and the wealth of an investor with a logarithmic utility function, where the information system may provide information concerning the payoffs from risky investments. It is shown, for the logarithmic investor, that (a) there is a wealth "break-even point" below which it is suboptimal to purchase an information system at a fixed cost, and (b) the amount the investor would be willing to pay for access to the information system is a linearly increasing function of his wealth.

Date: 1974
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:21:y:1974:i:4:p:383-391

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