The Cost of Information
We develop an axiomatic theory of information acquisition that captures the idea of constant marginal costs in information production: the cost of generating two independent signals is the sum of their costs, and generating a signal with probability half costs half its original cost. Together with a monotonicity and a continuity conditions, these axioms determine the cost of a signal up to a vector of parameters.These parameters have a clear economic interpretation and determine the difficulty of distinguishing states. We argue that this cost function is a versatile modeling tool that leads to more realistic predictions than mutual information.

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Link to paper:
tamuz.caltech.edu/papers/cost_of_information.pdf
Date: 31 May 2019, 14:15 (Friday, 5th week, Trinity 2019)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room A
Speaker: Philipp Strack (UC Berkeley)
Organising department: Department of Economics
Part of: Nuffield Economic Theory Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark