Information Systems in Management Science—Information Evaluation and Decision Makers' Objectives

Abstract

The article is preceeded by a short editorial introduction by the column editor Andrew Vazsonyi of St. Mary's University, San Antonio, Texas. Theoretically, the value of information is defined as the difference between the value of the business outcome with and without having the information. Although this definition is straightforward, its application to real situations is extremely difficult, if not impossible. Information Economics (IE) suggests an avenue of approach to the problem via concepts of Decision Theory. In a discussion based on these concepts, Vazsonyi [Vazsonyi, Andrew. 1979. Concerning the dangers of little knowledge. Interfaces 9 (3, May) 78–86.] demonstrates by means of an example that the common notion that the value of information is directly related to the uncertainty it removes is not necessarily correct. He concludes by three statements, the last of which is: “Choice of an information system must be based on your state of mind and cost/benefit analysis, that is, maximization of expected utility.” This statement is based on another conception; that individual's desire to maximize expected utility. However, utility is not that simple, and often we have multiple objectives and more than one outcome to consider, particularly when an individual is responsible for business decisions.