The Market Value of Information: Some Experimental Results

Thomas E. Copeland, Daniel Friedman
1992 The journal of business  
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more » ... rmation to the extent that the expected utility he or she obtains from making an optimal informed decision exceeds the expected utility obtained from an optimal uninformed decision. In a competitive economy the market value of a message that can be privately purchased is the monetary equivalent of its information value to a marginal individual. This much is conceptually straightforward. Matters become interesting when the trading behavior of an individual purchasing the message may partially or fully reveal its contents to nonpurchasers, as may be the case in competitive asset markets. Unfortunately, it is difficult to obtain direct empirical evidence on the extent to which private information is revealed in ongoing asset markets, since by its very nature private information is not observable by the econometrician. In contrast, laboratory experimental techniques in economics (e.g., Smith 1976 Smith , 1982 Plott 1982) allow the * We wish to express our thanks for financial support from the National Science Foundation; for computer programming by Heikki Ketola and James Witaker, for research assistance by Peter Carr, Gregory Allen, Alexander von Borries, and Chanyong Park; and for the helpful comments of Robert Forsythe, David Hirshleifer, Ray-Shine Lee, and two anonymous referees.
doi:10.1086/296567 fatcat:zfz7ip26vrhtfd3fag7gsaqkd4