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A Theoretical and Empirical Approach to the Value of Information in Risky Markets

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  • Antonovitz, Frances
  • Roe, Terry

Abstract

The theory of the competitive firm under price uncertainty is used to develop a money metric of a producer's willingness to pay for additional information. This concept is extended to the market by formulating ex-ante and ex-post measures of the value of a rational expectations forecast. The empirical feasibility of these measures are demonstrated by application to a simple two equation model of an agricultural market.
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Suggested Citation

  • Antonovitz, Frances & Roe, Terry, 1986. "A Theoretical and Empirical Approach to the Value of Information in Risky Markets," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 105-114, February.
    • Handle: RePEc:tpr:restat:v:68:y:1986:i:1:p:105-14
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    1. Roe, Terry L. & Antonovitz, Frances, 1984. "A Producer'S Willingness To Pay For Information Under Price Uncertainty: Theory And Application," Staff Papers 14013, University of Minnesota, Department of Applied Economics.
    2. DeCanio, Stephen J, 1980. "Economic Losses from Forecasting Error in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 234-258, April.
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    4. Rulon Pope & Jean-Paul Chavas & Richard E. Just, 1983. "Economic Welfare Evaluations for Producers under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(1), pages 98-107.
    5. Freebairn, J W, 1976. "The Value and Distribution of the Benefits of Commodity Price Outlook Information," The Economic Record, The Economic Society of Australia, vol. 52(138), pages 199-212, June.
    6. David A. Bessler, 1980. "Aggregated Personalistic Beliefs on Yields of Selected Crops Estimated Using ARIMA Processes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 666-674.
    7. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
    8. Hess, James, 1982. "Risk and the gain from information," Journal of Economic Theory, Elsevier, vol. 27(1), pages 231-238, June.
    9. Rulon D. Pope, 1978. "The Expected Utility Hypothesis and Demand-Supply Restrictions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(4), pages 619-627.
    10. Frydman, Roman, 1981. "Towards an Understanding of Market Processes: Individual Expectations, Market Behavior and Convergence to Rational Expectations Equilibrium," Working Papers 81-12, C.V. Starr Center for Applied Economics, New York University.
    11. J. W. Freebairn, 1976. "The Value and Distribution of the Benefits of Commodity Price Outlook Information," The Economic Record, The Economic Society of Australia, vol. 52(2), pages 199-212, June.
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