Making Information More Valuable

TL;DR

This paper characterizes when and how an agent's decision problem makes information more valuable, linking increased value to convexity in her belief-based payoffs and applying findings to economic scenarios.

Contribution

It establishes a precise condition relating increased information value to convexity of belief payoffs and extends this to multiple actions and economic applications.

Findings

Information value increases iff belief payoff becomes more convex.

Convexity increase occurs under a simple geometric condition when adding actions.

Applications include monopolistic screening and delegation with information acquisition.

Abstract

We study what changes to an agent's decision problem increase her value for information. We prove that information becomes more valuable if and only if the agent's reduced-form payoff in her belief becomes more convex. When the transformation corresponds to the addition of an action, the requisite increase in convexity occurs if and only if a simple geometric condition holds, which extends in a natural way to the addition of multiple actions. We apply these findings to two scenarios: a monopolistic screening problem in which the good is information and delegation with information acquisition.