Information and the risk-averse firm

This paper has two goals. First, we demonstrate that standard arguments and methods from production and duality analysis can be used to provide a comprehensive and general treatment of the value of information for a risk-averse firm with expected-utility (linear-in-probabilities) preferences and a general stochastic technology. Second, we place bounds on the value of information for a risk-averse firm and relate these bounds to characteristics of the technology and the producer's preferences. A particularly striking observation that emerges from this representation is that the most common representation of production uncertainty corresponds to a polar case that trivializes the role that information can play in economic decision making under risk.


Issue Date:
2003-10
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/150344
Total Pages:
25
JEL Codes:
D8
Series Statement:
Risk and Uncertainty Program
2/R03




 Record created 2017-04-01, last modified 2017-08-27

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