Alaoui, Larbi (2008): The value of useless information.
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Abstract
There are a number of cases in which individuals do not expect to find out which outcome occurs. The standard von NeumannMorgenstern Expected Utility model cannot be used in these cases, since it does not distinguish between lotteries for which the outcomes are observed by the agent and lotteries for which they are not. This paper provides an axiomatic model that makes this distinction. A representation theorem is then obtained. This framework admits preferences for observing the outcome, and preferences for remaining in doubt. Doubtproneness and doubtaversion are defined, and the relation between riskaversion, caution and doubtattitude is explored. The model builds on the standard vNM framework, but other frameworks can also be extended to allow for preferences for observing the outcomes and preferences for remaining in doubt. A methodology for this extension is also provided. This framework can accommodate behavioral patterns that are inconsistent with the vNM model, and which have let to significantly different models. In particular, this framework accommodates selfhandicapping, in which an agent chooses to impair his own performance. It also admits a statusquo bias, even though it does not allow for framing effects. In a political economy setting, voters have incentive to remain ignorant even if information is costless.
Item Type:  MPRA Paper 

Original Title:  The value of useless information 
Language:  English 
Keywords:  Decision theory; Value of information; Doubt; Unobserved outcomes; Unresolved lotteries 
Subjects:  D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D80  General 
Item ID:  11411 
Depositing User:  Larbi Alaoui 
Date Deposited:  08. Nov 2008 15:20 
Last Modified:  07. Jan 2014 20:04 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/11411 
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