Testing negative value of information and ambiguity aversion

Christopher Kops, Illia Pasichnichenko*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

The standard Subjective Expected Utility model of decision-making implies that information can never have a negative value ex-ante. Many ambiguity theories have since questioned this property. We provide an experimental test of the connection between the value of information and ambiguity attitude. Our results show that the value of information can indeed be negative when new information renders hedging against ambiguity impossible. Moreover, the value of information is correlated with ambiguity aversion. This confirms the predictions from ambiguity theories and may have implications for decision-making in uncertain and dynamic environments. Neither complexity avoidance nor information with ambiguous reliability can reproduce the results.
Original languageEnglish
Article number105730
Number of pages31
JournalJournal of Economic Theory
Volume213
DOIs
Publication statusPublished - 1 Oct 2023

JEL classifications

  • d81 - Criteria for Decision-Making under Risk and Uncertainty
  • d83 - "Search; Learning; Information and Knowledge; Communication; Belief"
  • d91 - "Intertemporal Consumer Choice; Life Cycle Models and Saving"

Keywords

  • value of information
  • information aversion
  • AMBIGUITY AVERSION
  • Ellsberg urn
  • dynamic consistency
  • complexity avoidance

Fingerprint

Dive into the research topics of 'Testing negative value of information and ambiguity aversion'. Together they form a unique fingerprint.

Cite this