Information and its Efficient use in Decision Models
A decision model, which may arise in economics, management science, communication theory or any other applied field, has three basic characteristics that are common to all: an agent or a set of decision-makers (DM), their decisions made before or after an event observed and the environment in which decisions are made. Information or more generally the information set or structure is any knowledge that is relevant to the agent or the DM, in terms of his payoff, utility or loss function. Usually the information structure refers to the knowledge about the environment, which help or hinder the DM in arriving at the most satisfactory decision; it may refer also to the lack of knowledge of the parameters of the DM’s payoff function itself which may be partly subjective in character.
KeywordsOptimal Decision Rational Expectation Limit Price Rational Expectation Complete Market
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