The Value of Environmental Information without Control of Subsequent Decisions

Detlof von Winterfeldt, Robert Kavet, Stephen Peck, Mayank Mohan and Gordon Hazen

Risk Analysis, 2012, vol. 32, issue 12, 2113-2132

Abstract: The standard value of information approach of decision analysis assumes that the individual or agency that collects the information is also in control of the subsequent decisions based on the information. We refer to this situation as the “value of information with control (VOI‐C).” This paradigm leads to powerful results, for example, that the value of information cannot be negative and that it is zero, when the information cannot change subsequent decisions. In many real world situations, however, the agency collecting the information is different from the one that makes the decision on the basis of that information. For example, an environmental research group may contemplate to fund a study that can affect an environmental policy decision that is made by a regulatory organization. In this two‐agency formulation, the information‐acquiring agency has to decide, whether an investment in research is worthwhile, while not being in control of the subsequent decision. We refer to this situation as “value of information without control (VOI‐NC).” In this article, we present a framework for the VOI‐NC and illustrate it with an example of a specific problem of determining the value of a research program on the health effects of power‐frequency electromagnetic fields. We first compare the VOI‐C approach with the VOI‐NC approach. We show that the VOI‐NC can be negative, but that with high‐quality research (low probabilities of errors of type I and II) it is positive. We also demonstrate, both in the example and in more general mathematical terms, that the VOI‐NC for environmental studies breaks down into a sum of the VOI‐NC due to the possible reduction of environmental impacts and the VOI‐NC due to the reduction of policy costs, with each component being positive for low environmental impacts and high‐quality research. Interesting results include that the environmental and cost components of the VOI‐NC move in opposite directions as a function of the probability of environmental impacts and that VOI‐NC can be positive, even though the probability of environmental impacts is zero or one.

Date: 2012
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https://doi.org/10.1111/j.1539-6924.2012.01828.x

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