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18.07. Micro Theory Seminar: Philipp Strack

Micro Theory Seminar with Philipp Strack (University of California, Berkeley)

Event details
What
  • Micro Theory Seminar
When Jul 18, 2018
from 16:30 to 17:45
Where faculty room
Contact Name Stephan Lauermann
Contact Email
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Topic

Modeling the Cost of Information

 

Abstract

 
We provide an axiomatic theory of costly physical information acquisition. In the framework of Blackwell 1951, we pursue a nonparametric approach for determining the cost of an experiment. We consider three axioms of physical information acquisition: 1) The cost of an experiment depends only on its informational content; 2) Performing an experiment with probability 1/2 requires 1/ 2 the cost; and 3) the cost of observing two independent experiments is the sum of the individual costs. We provide a simple characterization of all continuous cost functions that satisfy the axioms: they are positive linear combinations of Kullback-Leibler divergences.
If, as in the recent literature, information acquisition is modeled as the choice of a distribution over posteriors, our theory provides a cost of physical information that, while simple, is technically and conceptually different from the standard approach based on Shannon entropy, and allows to express the idea that some states of the world are intrinsically harder to distinguish than others.
 

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