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Information and preference reversals in lotteries

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  • BakIr, Niyazi Onur
  • Klutke, Georgia-Ann

Abstract

Several approaches have been proposed for evaluating information in expected utility theory. Among the most popular approaches are the expected utility increase, the selling price and the buying price. While the expected utility increase and the selling price always agree in ranking information alternatives, Hazen and Sounderpandian [11] have demonstrated that the buying price may not always agree with the other two. That is, in some cases, where the expected utility increase would value information A more highly than information B, the buying price may reverse these preferences. In this paper, we discuss the conditions under which all these approaches agree in a generic decision environment where the decision maker may choose to acquire arbitrary information bundles.

Suggested Citation

  • BakIr, Niyazi Onur & Klutke, Georgia-Ann, 2011. "Information and preference reversals in lotteries," European Journal of Operational Research, Elsevier, vol. 210(3), pages 752-756, May.
    • Handle: RePEc:eee:ejores:v:210:y:2011:i:3:p:752-756
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    References listed on IDEAS

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    1. Ronald W. Hilton, 1981. "The Determinants of Information Value: Synthesizing Some General Results," Management Science, INFORMS, vol. 27(1), pages 57-64, January.
    2. David E. Bell & Peter C. Fishburn, 2001. "Strong One-Switch Utility," Management Science, INFORMS, vol. 47(4), pages 601-604, April.
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    6. Schoemaker, Paul J H, 1989. "Preferences for Information on Probabilities versus Prizes: The Role of Risk-Taking Attitudes," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 37-60, April.
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    8. Hazen, Gordon B & Sounderpandian, Jayavel, 1999. "Lottery Acquisition versus Information Acquisition: Prices and Preference Reversals," Journal of Risk and Uncertainty, Springer, vol. 18(2), pages 125-136, August.
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    1. Niyazi Onur Bakır & Georgia-Ann Klutke, 2014. "Buying price of event information in two-action decision problems," Environment Systems and Decisions, Springer, vol. 34(1), pages 38-48, March.
    2. Francisco Santos-Arteaga & Debora Di Caprio & Madjid Tavana, 2014. "A Self-regulating Information Acquisition Algorithm for Preventing Choice Regret in Multi-perspective Decision Making," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 6(3), pages 165-175, June.
    3. Hofer, Vera & Leitner, Johannes, 2011. "Should European gamblers play lotto in the USA?," European Journal of Operational Research, Elsevier, vol. 215(1), pages 181-187, November.
    4. Andrea C. Hupman & Jay Simon, 2023. "The Legacy of Peter Fishburn: Foundational Work and Lasting Impact," Decision Analysis, INFORMS, vol. 20(1), pages 1-15, March.
    5. Niyazi Onur Bakir, 2015. "Monotonicity of the Selling Price of Information with Risk Aversion in Two Action Decision Problems," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 7(2), pages 71-90, June.
    6. Ali E. Abbas & N. Onur Bakır & Georgia-Ann Klutke & Zhengwei Sun, 2013. "Effects of Risk Aversion on the Value of Information in Two-Action Decision Problems," Decision Analysis, INFORMS, vol. 10(3), pages 257-275, September.

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