Theory Of Information Acquisition Research Articles

The Cost of Information: The Case of Constant Marginal Costs

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 Blackwell monotonicity and a continuity condition, 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. (JEL D82, D83)

A social image theory of information acquisition, opinion formation, and voting

Recent empirical research on voter turnout has revealed a variety of regularities. Citizens who expect to be asked about their turnout decisions after the elections are more likely to vote. Parents whose children enter the electorate are more likely to vote when their children live home than when they left home. Citizens without social networks acquire less information about politics. We develop a model that can explain these and other empirical findings. In our model, citizens receive disutility from being perceived not to have voted. This motivates a citizen to vote. Moreover, a citizen feels worse being perceived not to have voted when he is thought to have a strong opinion as this raises expectations about his voting behavior among peers. When a citizen anticipates that he will likely vote, the latter concern motivates him to acquire information, to participate in political discussions, and to vote. However, when a citizen anticipates that he will likely abstain from voting, he shies away from politics to lower his peers’ expectations.

Toward a Theory of Visual Information Acquisition in Driving.

ObjectiveThe aim of this study is to describe information acquisition theory, explaining how drivers acquire and represent the information they need.BackgroundWhile questions of what drivers are aware of underlie many questions in driver behavior, existing theories do not directly address how drivers in particular and observers in general acquire visual information. Understanding the mechanisms of information acquisition is necessary to build predictive models of drivers’ representation of the world and can be applied beyond driving to a wide variety of visual tasks.MethodWe describe our theory of information acquisition, looking to questions in driver behavior and results from vision science research that speak to its constituent elements. We focus on the intersection of peripheral vision, visual attention, and eye movement planning and identify how an understanding of these visual mechanisms and processes in the context of information acquisition can inform more complete models of driver knowledge and state.ResultsWe set forth our theory of information acquisition, describing the gap in understanding that it fills and how existing questions in this space can be better understood using it.ConclusionInformation acquisition theory provides a new and powerful way to study, model, and predict what drivers know about the world, reflecting our current understanding of visual mechanisms and enabling new theories, models, and applications.ApplicationUsing information acquisition theory to understand how drivers acquire, lose, and update their representation of the environment will aid development of driver assistance systems, semiautonomous vehicles, and road safety overall.

A New Theory of Information Acquisition and Recovery: Intrinsic Geometry Approach with Asset Pricing Applications

We introduce a novel geometry-based method of modelling information that encompasses entropy-based approaches. A key contribution is that we explicitly construct the optimal path to acquire information. The economic driver of this geometry-based framework is knowledge state dependent marginal cost of information acquisition. The modelling benefits of our framework is exemplified by studying an extended myopic portfolio choice problem in asset pricing with information acquisition. We show using theory and empirical evidence that return and volatility curvatures, derived from the optimal information acquisition path, significantly explain equilibrium risky asset return level and volatility level. Another key contribution of our framework is information recovery. When an econometrician only observes the agent’s portfolio allocations, we provide geometric conditions for which the agent’s mean-variance information dynamics can be successfully recovered. Beyond asset pricing, our method of information acquisition and information recovery is applicable to general expected utility maximization problems within a general stochastic environment.

It's so Hot in Here: Information Avoidance, Moral Wiggle Room, and High Air Conditioning Usage

Environmental policies based on information provision are widespread, but have often proven ineffective. One possible explanation for information’s low effectiveness is that people actively avoid it. We conduct an online field experiment on air conditioning usage to test the theory of moral wiggle room, according to which people avoid information that would compel them to act morally, against the standard theory of information acquisition, and identify conditions under which each theory applies. In the experiment, we observe how exogenously imposing a feeling of moral obligation to reduce air conditioning usage and exploiting natural variation in the cost of doing so, given by outside temperature, influences subjects’ avoidance of information about their energy use impacts on the environment. Moral obligation increases information avoidance when it is hot outside, consistent with the moral wiggle room theory, but decreases it when outside temperature is low. Avoiding information positively correlates with air conditioning usage. These findings provide guidance about tailoring the use of nudges and informational tools to the decision environment.

Monitoring and Learning by Institutional Investors: Theory and Evidence

This paper revisits information acquisition theory from a corporate governance perspective, provides a novel theoretical motivation for external governance, and enriches the set of feasible empirical tests regarding information acquisition. Institutional investors can enhance firm fundamental values through costly monitoring, while their portfolio decisions are determined by endogenous information acquisition. I provide a simplified model, joining theoretical frameworks of external governance and information acquisition, to understand the intrinsic link between monitoring and learning activities of institutional investors. Intuitively, investors would inevitably acquire some firm-specific information during the process of monitoring a firm. One implication of this “non-separability” assumption, compared to the baseline case, is that investors optimally re-allocate monitoring effort from firms with low value of information acquisition to those with high value of information acquisition. This novel theoretical motivation for investors to exert costly monitoring effort, labelled as the “monitoring-for-learning” mechanism, is the major contribution of this paper that can lend theoretical support to recent empirical findings of monitoring and learning activities. Regarding information acquisition, the model predicts that institutional investors tend to acquire more precise information about the firms they can more effectively engage with and about those they initially hold larger stakes in. Consistent with recent empirical findings about distracted investor attention, the model also suggests that monitoring attention to certain firms be squeezed out when attention for information acquisition is substantially attracted to other firms. Suggestive empirical evidence is provided to support these predictions.

Double learning or double blinding: an investigation of vendor private information acquisition and consumer learning via online reviews

In this paper, building upon information acquisition theory and using portfolio methods and system equations, we made an empirical investigation into how online vendors and consumers are learning from each other, and how online reviews, prices, and sales interact among each other. First, this study shows that vendors acquire information from both private and public channels to learn the quality of their products to make price adjustment. Second, for the more popular products and newly released products, vendors are more motivated to acquire private information that is more precise than the average precision to adjust their price. Third, we document a full demand-mediation model between rating and price. In other words, there is no direct linkage between price and rating, and the impact of rating on price (the vendor learning) as well as the impact of price on rating (the consumer learning) are all through demand. Our results show that there is no fundamental difference between the pricing decisions with and without the consumer generated contents. The price is still driven by the supply and demand relationship and vendors only adjust their price in response to review change when those reviews impact sales. We proposed either the impact of reviews has been incorporated into sales or reviews are less truth worthy due to potential review manipulation. Given the complicate situation, we call for further study to unveil this double learning process with double blinding results.

Signaling and Information Acquisition in Authoritarian Institutions: Theory and Evidence from Russian Parliamentary Elections

What role do elections play in non-democracies? We propose a statistical test that can distinguish between two major theories of authoritarian elections: that elections can be used to maintain an image of invincibility of the regime (Signaling Theory), or that elections can be used to get information about the popularity of the regime (Information Acquisition Theory). While those theories might not be mutually exclusive, we show formally that they generate different prediction about the spatial allocation of electoral manipulation. Under Signaling Theory, electoral manipulation happens in the areas where the regime is not popular. Under Information Acquisition theory, electoral manipulation should happen only in the places where the regime is popular. Using the data from 2007 and 2011 Parliamentary elections in Russia, we find that electoral manipulation was more likely to happen in the regions where the level of support for the regime is lower. Decrease in one standard deviation of regime popularity is associated with the increase in the estimates of electoral manipulation by 0.2 standard deviation, thus corroborating Signaling Theory. Our estimations are robust to an array of proxies for electoral manipulation. We also confirm that the results are unlikely to be spurious using instrumental variables and placebo tests.

Information processing and decision-making: Evidence from the brain sciences and implications for economics

This article assesses the potential benefits of including findings from neurobiology in economic decision-making models. First, we emphasize that the evidence supports both ‘expected utility-like’ theory and ‘Bayesian-like’ information acquisition theory. Second, we explain that inferences and representations are subject to physiological limitations that affect decision making. We report in particular two ‘mechanical’ models developed in neuroscience to represent neural data and choices. We then propose two economic models that incorporate physiological limitations into an expected utility framework. Interestingly, these two models provide foundations for those developed in neuroscience (which emerge endogenously in our framework) and provide further predictions that can be tested in principle. This allows us to discuss the benefits of bringing together evidence from neuroscience and economic modeling.

Decision Making for Rapid Information Acquisition in the Reconnaissance of Random Fields

In this paper, research into several aspects of robot-enabled reconnaissance of random fields is reported. The work has two major components: the underlying theory of information acquisition in the exploration of unknown fields and the results of experiments on how humans use sensor-equipped robots to perform a simulated reconnaissance exercise. The theoretical framework reported herein extends work on robotic exploration that has been reported by ourselves and others. Several new figures of merit for evaluating exploration strategies are proposed and compared. Using concepts from differential topology and information theory, we develop the theoretical foundation of search strategies aimed at rapid discovery of topological features (locations of critical points and critical level sets) of a priori unknown differentiable fields. The theory enables study of efficient reconnaissance strategies in which the tradeoff between speed and accuracy can be understood. The proposed approach to rapid discovery of topological features has led in a natural way to the creation of parsimonious reconnaissance routines that do not rely on any prior knowledge of the environment. The design of topology-guided search protocols uses a mathematical framework that quantifies the relationship between what is discovered and what remains to be discovered. The quantification rests on an information theory inspired model whose properties allow us to treat search as a problem in optimal information acquisition. A central theme in this approach is that “conservative” and “aggressive” search strategies can be precisely defined, and search decisions regarding “exploration” versus “exploitation” choices are informed by the rate at which the information metric is changing. The paper goes on to describe a computer game that has been designed to simulate reconnaissance of unknown fields. Players carry out reconnaissance missions by choosing sequences of motion primitives from two families of control laws that enable mobile robots to either ascend/descend in gradient directions of the field or to map contours of constant field value. The strategies that emerge from the choices of motion sequences are classified in terms of the speed with which information is acquired, the fidelity with which the acquired information represents the entire field, and the extent to which all critical level sets have been approximated. The game thus records each player's performance in acquiring information about both the topology and geometry of the unknown fields that have been randomly generated.

Why is it difficult to see in the fog? How stimulus contrast affects visual perception and visual memory.

Processing visually degraded stimuli is a common experience. We struggle to find house keys on dim front porches, to decipher slides projected in overly bright seminar rooms, and to read 10th-generation photocopies. In this research, we focus specifically on stimuli that are degraded via reduction of stimulus contrast and address two questions. First, why is it difficult to process low-contrast, as compared with high-contrast, stimuli? Second, is the effect of contrast fundamental in that its effect is independent of the stimulus being processed and the reason for processing the stimulus? We formally address and answer these questions within the context of a series of nested theories, each providing a successively stronger definition of what it means for contrast to affect perception and memory. To evaluate the theories, we carried out six experiments. Experiments 1 and 2 involved simple stimuli (randomly generated forms and digit strings), whereas Experiments 3-6 involved naturalistic pictures (faces, houses, and cityscapes). The stimuli were presented at two contrast levels and at varying exposure durations. The data from all the experiments allow the conclusion that some function of stimulus contrast combines multiplicatively with stimulus duration at a stage prior to that at which the nature of the stimulus and the reason for processing it are determined, and it is the result of this multiplicative combination that determines eventual memory performance. We describe a stronger version of this theory--the sensory response, information acquisition theory--which has at its core, the strong Bloch's-law-like assumption of a fundamental visual system response that is proportional to the product of stimulus contrast and stimulus duration. This theory was, as it has been in the past, highly successful in accounting for memory for simple stimuli shown at short (i.e., shorter than an eye fixation) durations. However, it was less successful in accounting for data from short-duration naturalistic pictures and was entirely unsuccessful in accounting for data from naturalistic pictures shown at longer durations. We discuss (1) processing differences between short- and long-duration stimuli, (2) processing differences between simple stimuli, such as digits, and complex stimuli, such as pictures, (3) processing differences between biluminant stimuli (such as line drawings with only two luminance levels) and multiluminant stimuli (such as grayscale pictures with multiple luminance levels), and (4) Bloch's law and a proposed generalization of the concept of metamers.

Binocular information acquisition and visual memory.

Mechanisms underlying the binocular combination of visual information were investigated within the context of a visual information acquisition theory proposed by Loftus, Busey, and their colleagues (e.g., as described by T.A. Busey & G. R. Loftus, 1994). A central assumption of the theory is that of a sensory threshold, which engenders an information loss such that information processing subsequent to the threshold is assumed to occur only when the magnitude of a sensory representation triggered by the stimulus exceeds the threshold. The presumed sensory threshold may be situated prior to or subsequent to the point at which the information from the two eyes combines. The location of this threshold was investigated in 3 experiments that provided conclusions about the location of the sensory thresholds and the mechanisms of binocular combination. It is concluded that a linear summation mechanism, an independent sampling information acquisition model, and both pre- and postcombinatorial sources of information loss are required to account for the data.

The logics and boundary concepts of information acquisition

AbstractBased on the concept of a set of mutually exclusive alternatives, the process of acquisition of knowledge is explained as a change from logical sum to logical product proposition. It is shown further that the definitions of the concept of information and ignorance can be derived from the basic concept of the mutually exclusive set and the definition of information acquisition. It is then demonstrated that other concepts essential in information theory can be defined and explained on the basis of the theory of information acquisition as presented in this article in a consistent way. It is further demonstrated that any nonmutually exclusive set can be converted to a mutually exclusive one, therefore a set of mutually exclusive alternatives represents a boundary concept that can form a foundation for information theory. The concept of a priori knowledge can be explained as a concept of a one‐alternative set and by that it forms another boundary where acquisition of information is no longer necessary. This way there are two boundary concepts in information theory and other concepts are then defined from them. They include the definition of the concept of problem and the concept of so‐called general statements, the role and function of prior knowledge and deductive reasoning in design of mutually exclusive sets, the function of our senses, their substitutes, and the concept of so‐called sixth sense as their boundary concept. Finally the concepts of the amount of information and ignorance and their measures are presented.

The individuals information acquisition: test of a model

Describes the theory on information acquisition by the individual in relation to buying goods. Gives the results of six investigations carried out in Denmark into the operation of variable and testing of basic hypotheses in the theory of information acquisition by individuals. Reveals the difficulties of practical application of the present model.