Technical Note—The Effect of Risk Aversion on the Expected Value of Perfect Information

We consider the value of information when the decision-maker is averse to risk, and identify a bound on the maximal amount that the decision-maker is willing to pay to completely reduce uncertainty. We show that, for a class of unfavorable projects with nonpositive expected monetary value, a decision-maker neutral to risk is willing to pay at least as much for perfect information as is a decision-maker who is averse to risk. Finally, we analyze the effect of shifting the mean of the a priori distribution of the project's monetary value, and calculate the value of perfect information for a family of utility functions and a class of symmetric distributions centered at zero.