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The Value of Sequential Information

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  • Allen C. Miller

    (Stanford Research Institute)

Abstract

In decision analysis we normally consider the value of information to be a constant against which the cost of information is compared. However, when it is possible to buy information sequentially, the value of information is not a constant. Rather, it is a function of the prices of the various pieces of information, or "observables." When we are faced with a decision and learn one observable, this information not only helps us make the original decision, but also helps us decide if we should pay for more observables. For this reason, the first observable has a value above and beyond that which we would assign if there were no possibility of obtaining additional information. To decide whether or not to buy one observable we must know the prices of all the observables.

Suggested Citation

  • Allen C. Miller, 1975. "The Value of Sequential Information," Management Science, INFORMS, vol. 22(1), pages 1-11, September.
    • Handle: RePEc:inm:ormnsc:v:22:y:1975:i:1:p:1-11
    DOI: 10.1287/mnsc.22.1.1
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    Cited by:

    1. David Matheson & James E. Matheson, 2005. "Describing and Valuing Interventions That Observe or Control Decision Situations," Decision Analysis, INFORMS, vol. 2(3), pages 165-181, September.
    2. 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.
    3. Jeffrey M. Keisler, 2005. "Additivity of Information Value in Two‐Act Linear Loss Decisions with Normal Priors," Risk Analysis, John Wiley & Sons, vol. 25(2), pages 351-359, April.
    4. Wesley J. Marrero & Mariel S. Lavieri & Jeremy B. Sussman, 2021. "Optimal cholesterol treatment plans and genetic testing strategies for cardiovascular diseases," Health Care Management Science, Springer, vol. 24(1), pages 1-25, March.
    5. Lin, Chaochao & Song, Junho & Pozzi, Matteo, 2022. "Optimal inspection of binary systems via Value of Information analysis," Reliability Engineering and System Safety, Elsevier, vol. 217(C).
    6. Rajiv D. Banker & Robert J. Kauffman, 2004. "50th Anniversary Article: The Evolution of Research on Information Systems: A Fiftieth-Year Survey of the Literature in Management Science," Management Science, INFORMS, vol. 50(3), pages 281-298, March.

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