Cabrales, Antonio Gossner, Olivier Serrano, Roberto
Year of Publication:
Working Paper, Brown University, Department of Economics 2012-13
An information transaction entails the purchase of information. Formally, it consists of an information structure together with a price. We develop an index of the appeal of information transactions, which is derived as a dual to the agent's preferences for information. The index of information transactions has a simple analytic characterization in terms of the relative entropy from priors to posteriors, and it also connects naturally with a recent index of riskiness.
informativeness information transactions Kullback-Leibler divergence relative entropy decision under uncertainty investment Blackwell ordering