Incentives for information acquisition

Jack E. Wahl and Adrian Tschoegl ()

No 8, Discussion Papers, Series C from University of Konstanz, Department of Economics

Abstract: This paper examines necessary conditions for a demand for new information to exist. In this one-period model, investors are homogeneous, have logarithmic utility, and must decide on information acquisition before trading starts, and without knowing what other investors will do. We examine the decision problems under scenarios defined by whether information is costless or costly to acquire, whether aggregate consumption is endogeneous or exogeneously given, and whether investors can or cannot costlessly cooperate. In all cases a demand for new information exists as all investors decide to acquire provided the price is below endogeneously determined bounds.

Date: 1985
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