Abstract
Wakker (1988) has recently shown that, in contrast to an expected utility maximizer, the value of information will sometimes be negative for an agent who violates the independence axiom of expected utility theory. We demonstrate, however, that the value ofperfect information will always be nonnegative if the agent satisfies a weak dominance axiom. This result thus mitigates to some degree the normative objection to nonlinear utility theory implicit in Wakker's finding.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Hammond, P.: 1988, ‘Consequentialist Foundations for Expected Utility,’Theory and Decision 25, 25–78.
Karni, E. and Schmeidler, D.: 1990, ‘Utility Theory with Uncertainty,’ working paper.
Machina, M.: 1989, ‘Dynamic Consistency and Non-expected Utility Models of Choice Under Uncertainty,’Journal of Economic Literature 27, 1622–1668.
Quiggin, J.: 1982, ‘A Theory of Anticipated Utility Theory,’Journal of Economic Behavior and Organization 3, 323–343.
Schlee, E.: 1990, ‘The Value of Information in Anticipated Utility Theory,’Journal of Risk and Uncertainty 3, 83–92.
Wakker, P.: 1988, ‘Nonexpected Utility as Aversion of Information,’Journal of Behavioral Decision Making 1, 169–175.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Schlee, E.E. The value of perfect information in nonlinear utility theory. Theor Decis 30, 127–131 (1991). https://doi.org/10.1007/BF00134120
Issue Date:
DOI: https://doi.org/10.1007/BF00134120