Abstract
In a recent lecture on Risk Allocation and Information , ARROW [1978, p. 9] maintains that an increase in information may lower the efficiency of the market in that it effectively prevents the sharing of risk-bearing and destroys the corresponding utility gain (ibid.). This result is indeed surprising, but it depends, as we shall argue below, on a questionable usage of the concepts of ex ante probability and expected utility. For a proof of his assertion cited above, ARROW considers the following example: There are two individuals, each endowed with a stock of one unit of a particular commodity: one (Walras) has a unit of wheat, the other (Bohm-Bawerk) a
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