Alaoui, Larbi (2009): The value of useless information.
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Abstract
There are many situations in which individuals do not expect to find out which outcome will occur. The standard vNM Expected Utility model is inappropriate 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 which makes this distinction, and which admits preferences for observing the outcome as well as preferences for remaining in doubt. A representation theorem is obtained. Doubtproneness and doubtaversion are then defined, and the relation between riskaversion, caution and doubt attitude is characterized. The model extends the standard vNM framework, but other frameworks, such as nonexpected utility models, can also be extended to allow for preferences for observing the outcomes and preferences for remaining in doubt. A general methodology for extending these wellknown frameworks is therefore provided. This framework can accommodate behavioral patterns that are inconsistent with the vNM model, and that have motivated the development of models that differ significantly from the standard vNM framework. In particular, this framework accommodates selfhandicapping, in which an agent chooses to impair his own performance. It also admits a status quo bias, without having recourse to framing effects. Several other examples are provided. In one example, voters prefer to remain ignorant, and as the importance of the relevant issues increases, their incentive to acquire information decreases.
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:  12028 
Depositing User:  Larbi Alaoui 
Date Deposited:  09. Dec 2008 14:40 
Last Modified:  16. Feb 2013 04:01 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/12028 
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