TY - JOUR
T1 - COMPARATIVE EVALUATION OF INFORMATION UNDER TWO BUSINESS OBJECTIVES
AU - Ahituv, Niv
AU - Wand, Yair
PY - 1984/1
Y1 - 1984/1
N2 - Information economics models evaluate the value of information under the assumption that decision makers wish to maximize their expected payoff. This assumption has been criticized for not being realistic enough since decision makers usually consider more than one business objective and might be satisficers rather than optimizers. This paper attempts to apply an information economics model to decision situations where two business performance criteria, expected payoff and risk, are considered. In order to overcome the difficulty of unknown trade‐off between the two criteria, one criterion is used as an objective to be optimized, while the other is set as a constraint. This may be interpreted as a combination of optimizing and satisficing approaches. It is shown how an information system can be evaluated in terms of both expected payoff and risk. The model suggests the trade‐off between the two criteria as an additional trait of an information system. In the last part of the paper, a numerical example illustrates how a comparative evaluation of information structures is performed when risk minimization and expected payoff maximization are concurrently used as business performance criteria.
AB - Information economics models evaluate the value of information under the assumption that decision makers wish to maximize their expected payoff. This assumption has been criticized for not being realistic enough since decision makers usually consider more than one business objective and might be satisficers rather than optimizers. This paper attempts to apply an information economics model to decision situations where two business performance criteria, expected payoff and risk, are considered. In order to overcome the difficulty of unknown trade‐off between the two criteria, one criterion is used as an objective to be optimized, while the other is set as a constraint. This may be interpreted as a combination of optimizing and satisficing approaches. It is shown how an information system can be evaluated in terms of both expected payoff and risk. The model suggests the trade‐off between the two criteria as an additional trait of an information system. In the last part of the paper, a numerical example illustrates how a comparative evaluation of information structures is performed when risk minimization and expected payoff maximization are concurrently used as business performance criteria.
KW - Decision Analysis
KW - Information Economics
KW - Risk and Uncertainty
KW - and Statistical Decision Theory.
UR - http://www.scopus.com/inward/record.url?scp=0041356559&partnerID=8YFLogxK
U2 - 10.1111/j.1540-5915.1984.tb01195.x
DO - 10.1111/j.1540-5915.1984.tb01195.x
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AN - SCOPUS:0041356559
SN - 0011-7315
VL - 15
SP - 31
EP - 51
JO - Decision Sciences
JF - Decision Sciences
IS - 1
ER -