Suchergebnisse

We investigate conditions under which the value of additional information is diminishing in a setting where the decision maker has access to multiple, identically-distributed, information signals. The signals are assumed to be independent conditional on an unknown payoff-relevant parameter. The decision maker minimizes a quadratic loss function. Quadratic losses arise in quality control, scoring rules, and other applications. We characterize two concepts of diminishing marginal value of information. The first is an ex ante concept, before any information is observed, and the second is an ex post concept, after observation of previous information signals. The former concept is useful for ex ante information acquisition decisions and the latter for sequential information acquisition.

When the seller of an asset grants a right-of-first-refusal to a buyer, this special buyer has the opportunity to purchase the asset at the best price the seller can obtain from the other potential buyers. We show that the right-of-first-refusal is inefficient, and it benefits the special buyer at the expense of the seller and other buyers. In a private values model, the benefit the special buyer obtains via the right-of-first-refusal equals the cost to the seller. When buyers' valuations are correlated, the presence of a special buyer exacerbates the winner's curse on regular buyers. Consequently, the special buyer's expected gain from the right-of-first-refusal is often less than the expected loss to the seller. Thus, our analysis suggests that the seller should exercise considerable caution prior to deciding whether to grant this right to a buyer.