TY - JOUR

T1 - The value of a stochastic information structure

AU - Azrieli, Yaron

AU - Lehrer, Ehud

N1 - Funding Information:
An anonymous referee of Games and Economic Behavior is particularly acknowledged for his/her insightful comments. We also thank Dinah Rosenberg, Eran Shmaya and the associate editor of Games and Economic Behavior for their helpful comments. The second author acknowledges the support of the Israel Science Foundation, Grant No. 762/04.

PY - 2008/7

Y1 - 2008/7

N2 - Upon observing a signal, a Bayesian decision maker updates her probability distribution over the state space, chooses an action, and receives a payoff that depends on the state and the action taken. An information structure determines the set of possible signals and the probability of each signal given a state. For a fixed decision problem, the value of an information structure is the maximal expected utility that the decision maker can get when the observed signals are governed by this structure. Thus, every decision problem induces a preference order over information structures according to their value. We characterize preference orders that can be obtained in this way. We also characterize the functions defined over information structures that measure their value.

AB - Upon observing a signal, a Bayesian decision maker updates her probability distribution over the state space, chooses an action, and receives a payoff that depends on the state and the action taken. An information structure determines the set of possible signals and the probability of each signal given a state. For a fixed decision problem, the value of an information structure is the maximal expected utility that the decision maker can get when the observed signals are governed by this structure. Thus, every decision problem induces a preference order over information structures according to their value. We characterize preference orders that can be obtained in this way. We also characterize the functions defined over information structures that measure their value.

KW - Bayesian decision making

KW - Information function

KW - Information structure

KW - Preference order

UR - http://www.scopus.com/inward/record.url?scp=44649173748&partnerID=8YFLogxK

U2 - 10.1016/j.geb.2005.12.003

DO - 10.1016/j.geb.2005.12.003

M3 - ???researchoutput.researchoutputtypes.contributiontojournal.article???

AN - SCOPUS:44649173748

SN - 0899-8256

VL - 63

SP - 679

EP - 693

JO - Games and Economic Behavior

JF - Games and Economic Behavior

IS - 2

ER -