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

Galanis, Spyros, The Value of Information Under Unawareness (January 23, 2015). Journal of Economic Theory, Vol. 157, 2015, Available at SSRN: https://ssrn.com/abstract=3117975 or http://dx.doi.org/10.2139/ssrn.3117975

Spyros Galanis (Contact Author)

Durham University ( email )

Durham, DH1 3LE
Great Britain

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