Title: Expected-Utility Preference Reversals in Information Acquisition
Authors: Gordon B. Hazen, Northwestern University and Jayavel Sounderpandian, University of Wisconsin-Parkside
Date: May 1998
Status: working paper

Suppose you must choose between two pieces of information A and B. In the absence of cost, you would prefer to obtain A rather than B, and in fact would be willing to take more risk to obtain A than B. Nevertheless, you would pay more money for B than for A. Are your preferences consistent with expected utility? The answer is yes, they may very well be. We give an example to illustrate how this may happen, and relate this reversal phenomenon to the well-known discrepancy between buying and selling prices for lotteries. The existence of such reversals dispels any notion that the relative value of competing information acquisitions should not depend on the nature of the acquisition. Among expected utility maximizers, only those with constant risk attitude avoid this phenomenon.

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