Effects of risk aversion on value of information in two-action decision problems

This thesis work analyzes the value of information in two-action decision problems with different settings and provides upper and lower bounds on the value of perfect information. The research shows that if two decision makers accept the lottery without the information, then the more risk averse decision maker will value the perfect information higher than the less risk averse one. Conversely, if two decision makers reject the lottery without the information, then the less risk averse decision maker will value the perfect information higher than the more risk averse one. Finally, if a decision maker feels indifferent between accepting and rejecting the lottery without the information, then he/she will value the perfect information higher than any other decision maker with a more or less risk aversion. The work reveals that different measures of risk aversion are corresponding to the different assumptions on the dependent structure between the initial wealth and the lottery. This thesis exhibits how the different lotteries change the effects of risk aversion on the value of perfect information. Finally, the research extends these results to the imperfect information on sets under some assumptions.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Industrial Engineering

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2013

Author dc:creator

• Sun, Zhengwei

Contributors dc:contributor

• Abbas, Ali E.
• Pang, Jong-Shi
• Song, Renming
• Feng, Liming

• risk aversion
• value of information
• Ross's measure
• stochastic dominance

Statement dc:rights

• Copyright 2012 Zhengwei Sun

Language dc:language

en

Handle dc:identifier

http://hdl.handle.net/2142/42295

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/42295