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More nonconcavities in information processing functions

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  • Hagen LINDSTÄDT

Abstract

The productivity of (human) information processing as an economic activity is a question that is raising some interest. Using Marschak's evaluation framework, Radner and Stiglitz have shown that, under certain conditions, the production function of this activity has increasing marginal returns in its initial stage. This paper shows that, under slightly different conditions, this information processing function has repeated convexities with ongoing processing activity. Even for smooth changes in the signals' likelihoods, the function is only piecewise smooth with non-differentiable convexities at points of conditional changes of action. For linear likelihood functions the processing value proves to be piecewise linear with convexities at these levels. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Hagen LINDSTÄDT, 2001. "More nonconcavities in information processing functions," Theory and Decision, Springer, vol. 51(2), pages 351-365, December.
    • Handle: RePEc:kap:theord:v:51:y:2001:i:2:p:351-365
    DOI: 10.1023/A:1015515312757
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    References listed on IDEAS

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    1. Jacob Marschak, 1959. "Efficient and Viable Organizational Forms," Cowles Foundation Discussion Papers 65, Cowles Foundation for Research in Economics, Yale University.
    2. Arrow, Kenneth J, 1985. "Informational Structure of the Firm," American Economic Review, American Economic Association, vol. 75(2), pages 303-307, May.
    3. Kenneth J. Arrow, 1975. "Vertical Integration and Communication," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 173-183, Spring.
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    Cited by:

    1. Hagen Lindstädt, 2007. "Valuing Others’ Information under Imperfect Expectations," Theory and Decision, Springer, vol. 62(4), pages 335-353, May.

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