5 research outputs found
Essays in information design
A relatively recent strand of economic literature studies the design of information. Classical economic models analyze optimal decision-making (e.g., profit-maximizing firms choosing prices or quantities) taking a particular economic environment as given. Such an environment, and in particular the knowledge of its characteristics by decision-makers, is usually endogenous in the real world. The information that decision-makers process plays a role in determining their decisions. Therefore, it is fundamental to understand what is the content of the information available to decision-makers and why
Entropy and the value of information for investors
Consider any investor who fears ruin facing any set of investments that satisfy noarbitrage. Before investing, he can purchase information about the state of nature in the form of an information structure. Given his prior, information structure α is more informative than information structure β if whenever he rejects α at some price, he also rejects β at that price. We show that this complete informativeness ordering is represented by the decrease in entropy of his beliefs, regardless of his preferences, initial wealth or investment problem. It is also shown that no prior-independent informativeness ordering based on similar premises exists.Informativeness, Information structures, Entropy, Decision under uncertainty, Investment, Blackwell ordering