Theory and Decision

, Volume 51, Issue 2, pp 351-365

First online:

More nonconcavities in information processing functions

  • Hagen LINDSTÄDTAffiliated withDepartment of Strategic Management and Organization, HHL – Leipzig Graduate School of Management Email author 

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The productivity of (human) information processing as an economic activity is a question that is raising some interest. Using Marschak's evaluation framework, Radner and Stiglitz have shown that, under certain conditions, the production function of this activity has increasing marginal returns in its initial stage. This paper shows that, under slightly different conditions, this information processing function has repeated convexities with ongoing processing activity. Even for smooth changes in the signals' likelihoods, the function is only piecewise smooth with non-differentiable convexities at points of conditional changes of action. For linear likelihood functions the processing value proves to be piecewise linear with convexities at these levels.

Value of Information Information Structures Information Processing Functions Information Economics Decision