The Value of Information Under Unawareness
12 Pages Posted: 15 Feb 2018 Last revised: 18 Apr 2018
Date Written: January 23, 2015
Abstract
The value of information is examined in a single-agent environment with unawareness. Al though the agent has a correct prior about events he is aware of and has a clear understanding of his available actions and payoffs, his unawareness may lead him to commit information processing errors and to behave suboptimally. As a result, the value of information can be negative, contrasting what is true in the standard model with partitional information and no unawareness. We show that the source of the agent’s suboptimal behavior is that he misunderstands the information revealed by his varying awareness, treating it asymmetrically.
Keywords: unawareness, value of information, uncertainty, knowledge, bounded perception, awareness
JEL Classification: C70, D01, D80, D82
Suggested Citation: Suggested Citation