On Cash Equivalents and Information Evaluation in Decisions Under Uncertainty Part I: Basic Theory

The monetary evaluation of decisions under uncertainty and of associated opportunities to acquire information is well known and conceptually straightforward when utility is linear in money. This analysis is generalized here to a class of nonlinear utility functions by defining and interrelating minimum selling and maximum buying prices for decisions (section 2), certainty equivalents of uncertain costs of information (section 3), values of information (section 4), and net gains of information (section 5). Preliminary material constitutes the first section, and section 6 summarizes results of particular usefulness in practice.