Talk:Information economics

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first wikipedia page[edit]

Hmm.. It logged me out while editing. Oh well. This is my first wikipedia page, so please go at it. Rick 03:24, 19 Jan 2005 (UTC)

example for the screening section[edit]

Is it possible to have a solid example for the screening section like in the signaling section -- My interpretation was that if someone is not aloud to ask about your religous beliefs, they would apply screening by asking a question about some obscure reference in the Bible or Koran and use your response to make inferences (maybe a bit more subtle than this example). Is this an accurate interpretation? 210.211.116.15 14:43, 30 December 2005 (UTC)

Other uses of Information Econoimics or renaming[edit]

Be advised that the term "Information Economics" had another use that predates this use of it. It refers to a particular weighted scoring system described in the book "Information Economics: Linking Business Performance to Information Technology" by Marilyn M. Parker, Robert J. Benson, and H.E. Trainor. This method has no relationship to the work of Akerlof, Spence and Stiglitz.

You are right that the Nobel-prize-winning work of Akerlof, Spence, and Stiglitz is unrelated to the topics covered in Parker, Benson, and Trainor's book. But the Parker et al. book (published 1988, unless there is an earlier version I'm unaware of) does not predate the work of Akerlof et al. (key papers in 1970 and 1973 cited in this article). --Rinconsoleao 09:09, 17 July 2007 (UTC)
Certainly the work of Akerlof, Spence and Stiglitz predates Parker, Benson, and Trainor. I was saying that Akerlof, Spence and Stiglitz didn't actually use the specific term "information economics" back then, although their terms were closely related.Hubbardaie 21:37, 17 July 2007 (UTC)

Also, it seems that the people in the particular field discussed in this article rarely if ever called it "Information Economics". I do see "economics of information" sometimes used by them but not exactly the given title of the article. As the sources cited in this article show, they may have used similar phrases, but not this one.

Unfortunately, there has been some inconsistency in usage when referring to this area of microeconomic theory. I believe the most standard name is "information economics", but I have also seen "economics of information" and "information theory", and "contract theory" is a closely related topic. --Rinconsoleao 09:09, 17 July 2007 (UTC)
Actually, information theory is quite another thing that predates all of this. The seminal paper on information theory was in the late 1940's. I discuss it in my book "How to Measure Anything". I hope we don't throw that one in the mix, too, and cause even more confusion. Hubbardaie 21:35, 17 July 2007 (UTC)

I would either rename it to use the names more commonly used by the authors of this Nobel prize winning method or I would insert a disambiguation tag.Hubbardaie 20:12, 8 June 2007 (UTC)

I would happily support the construction of a disambiguation page for "information economics". However, since it is a core area of microeconomic theory, I believe it is far more influential than any of the management techniques you have mentioned on this talk page. Therefore I think the default topic reached by querying "information economics" should be the field of microeconomic theory studied by Akerlof et al. --Rinconsoleao 09:09, 17 July 2007 (UTC)
I agree that what the authors of these methods called "economics of information" or "asymetric information" is core to microeconomic theory but I'm less convinced that "information economics" is the right term for it. I can't seem to find where Akerlof, Spence, or Stiglitz ever used that exact phrase to describe their work. At least none of the cited work uses that phrase. But even if this specific title is kept, I think there is precedent for how to handle it when there are less common, less notable uses of the same word or phrase. Simply keep this article as it is and have a disambiguation tag at the top in case they meant some other use of the term.Hubbardaie 21:35, 17 July 2007 (UTC)

Disambiguation?[edit]

Here are the variety of topics that would fall under this umbrella and, where needed, more specific names for them. Each of these should have a separate article after disambiguation:

  • Asymetric information in markets - the topic of the 2001 Nobel Prize in Economics
  • Information Economics - the name of the weighted scoring method for IT projects as described in the book "Information Economics: Linking Business Performance to Information Technology" by Parker, Bensen and Trainor.
  • Information Economics - a set of method described by Paul A. Strassman for benchmarking the efficiency and effectiveness of information use in an entire organization.
  • Applied Information Economics - A particular risk and value analysis method developed in 1995. Based on a combination of methods from decision theory, uncertainty modeling and portfolio management, it was initially developed for large IT investments, but with applications outside of IT.
  • Expected Value of Information - a method from decision theory for computing the value of uncertainty-reduction in one-player games against states of uncertainty.

Hubbardaie 05:33, 10 June 2007 (UTC)

Greenwald-Stiglitz and Information Economics[edit]

There is another problem with the entire structure of this article. It starts out saying that Information Economics is based on the Greenwald-Stiglitz theorem and then goes on to say that it comprises the topics "of information asymmetries, the economics of information goods, and the economics of information technology. A related area of study is economics of security."

You are right. Saying that it is "based on the Greenwald-Stiglitz theorem" is too narrow and therefore misleading. I have rewritten the introduction to be more correct. --Rinconsoleao 08:53, 17 July 2007 (UTC)

The author of this article is lumping together everything that seems like has something to do with economics and information. But the Greewald-Stiglitz theorem, on which it says "Information Economics" is based, only applies to the first of the four categories in mentions. In fact, the Greewald-Stiglitz is only even part of the 3-way Nobel prize for analysis of asymetric information in markets. From 1986 through the 1990's, Bruce Greenwald and Joe Stiglitz wrote a series of papers about how free markets cannot be as efficient as a system of some (idealized) government intervention because of how information asymetries affect behavior. Greenwald and Stiglitz described their theorem as being about "establishing the (constrained) Pareto inefficiency of market economies with imperfect information and incomplete markets."

Note that all of the work that is the subject of the Nobel comes after Paul A. Strassman published his first book from his "Information Economics Press" in 1985. Strassman, however, was a former Chief Information Officer talking about a set of simple financial accounting ratios that, he claimed, represented how efficiently a business used information. This was meant to be a measure of how well IT is working in an organization. He would have been completely unaware of the work that later won a Nobel Prize and the two have nothing in common theoretically.

The book "Information Economics: Linking Business Performance to Information Technology" by Parker, Bensen and Trainor, 1989, is another completely separate take on the value of IT in organizations. I've read this book and the name is entirely misleading - there is nothing about economics in it. The entire book is about an elaborate weighted scoring method with is supposed to tell businesses which IT investments are the highest priority. It has no theoretical or even empirical basis at all and is lightyears away from what the Nobel prize winners - or even Strassmann - were talking about.

Perhaps these last two uses of the term "information economics" are why the author of this article is lumping "the economics of information technology" with (even under) the work of Greenwald, Stiglitz, Spence and Akerlof. But they are apples and oranges. In fact, it was after reading the Parker, et al book that I saw that IT decision making was in dire need of real, not faux, economics. I developed Applied Information Economics in 1995 to bring an actual theoretical and empirical method into IT decision making. The AIE method itself, however, is more more related to the 1940s-50s work on game/decision theory than the method that won the Nobel. When the article lumps in the economics of IT security, it may be because of the large US government study I was involved in to compare my method with other methods by evaluating a large IT security investment in the department of Veterans Affairs.

The article throws in some citations that show how confused the author is about the topics. Instead of including a paper by Joe Stiglitz and Bruce Greenwald (whom he says provide the basis of Information Economics) the author shows a citation for George Stigler fron 1961 about "The Economics of Information". But Stigler is talking even more narrowly about how prices are not uniform for a given product (even given location and other variations) becuase gathing the information for the best price (i.e., shopping) is costly and inefficient.

This entire article needs to be replace by separate articles on each of these topics and - ideally - by someone that understands the differences in these subjects.

Here are a series of papers including the Greewald and Stiglitz papers on market inefficiencies: [1]

Hubbardaie 12:24, 10 June 2007 (UTC)

Contract theory, asymmetric information, and this article[edit]

I agree with the comments above that this article has a problematic name. Most problematic, however, is that other articles link here, when (i) most academic economists wouldn't know what you were talking about if you mentioned "information economics", in the sense that that name is not common jargon; (ii) the article on asymmetric information covers a lot of the ground that people seem to think is covered in this article; and (iii) the modern subfield of economics, which should be the top-level article on the economics of information, is Contract theory. I'm going to start directing articles that point to this article to those other articles (asymmetric information and contract theory). Help in that task-- and in making those articles better-- would be valuable. Jeremy Tobacman 19:36, 27 July 2007 (UTC)

I think we should be careful before deleting information economics. Perhaps it would be slightly more standard to call it economics of information, and then treat contract theory as a (modern) subset of economics of information. But leaving only contract theory as the main page on economic theories of information would be extremely misleading, since insights about how information differs from other goods played a fundamental role in economics (patents, public goods, Coase, Williamson, etc.) long before modern contract theory arose. And leaving information economics as a field of management theory is not correct either. --Rinconsoleao 15:02, 31 July 2007 (UTC)
Therefore, I suggest (1) find enough references to decide what we should call the main page on economic theories of information; (2) include in that page most of the material that was previously in information economics; (3) mention contract theory as a modern subfield that particularly pays attention to asymmetric information; (4) create a disambiguation page. --Rinconsoleao 15:02, 31 July 2007 (UTC)
Hi, Rinconsoleao: Turning information economics into a disambiguation page would make sense to me. (To make sure we're on the same page, I had proposed deletion of Category:Information economics, not the article information economics.) My point is that "information economics" has no well-defined meaning within the field of economics (offhand references by Joe Stiglitz notwithstanding), and I don't think it should be the role of this article to try to define it. Regarding the specific examples you mention, (i) patents generally fall under the rubric of the economics of innovation and productivity, within industrial organization; (ii) public goods can be informational, but more commonly we think of them as tangible things like parks, roads and national defense; and (iii) the contributions of Coase and Williamson will surely be discussed many places, but I imagine someday they will feature particularly prominently in an article on organizational economics, cf this new course, in addition to their coverage in theory of the firm and transaction costs. In addition, the material on bundling already in the information economics article could easily be folded into the very nice treatment of network externalities, which organizes much of the discussion of goods like information that have zero marginal cost. Would a dab page with links to most of these suit ok? Jeremy Tobacman 21:31, 31 July 2007 (UTC)
Hi Tobacman, I agree that all those topics could and should be included in other pages. Nonetheless, I think we should not delete the information economics page that now exists; rename it, maybe. The reason I favor keeping this page is that I do think many economists treat this as a unified field, even though modern additions to that field are heavily skewed towards the study of asymmetric information. Two recent textbooks that treat many varieties of information economics together are Information Economics, by Urs Birchler (2007) ISBN 041537345X, and Incentives: Motivation and the Economics of Information, 2nd ed., by Donald Campbell (2006), ISBN 0521832047. Interestingly, both are undergraduate texts... i.e. they both focus more on the big picture of the role played by information in economics and less on the highly technical recent theories of asymmetric information that are the focus of grad texts. The first book starts by discussing information as a public good, then information aggregation through prices, then moves on to information asymmetry topics. The second starts from information asymmetry and contract theory, then moves on to allocation of public goods and aggregation of information in general equilibrium. (What I know about these books is reading their tables of contents online... I will try to find them at my local library.) --Rinconsoleao 23:34, 31 July 2007 (UTC)
Also, I should mention that the forthcoming edition of the New Palgrave (2008) will have an article on 'information economics' by Stiglitz, separately from the articles on 'contract theory' by Martimort and 'asymmetric information' by Postlethwaite.
One addendum: upon examination, most of the wiki links incoming to information economics pertained to asymmetric information or contract theory. I changed a bunch of them in the last few days. Jeremy Tobacman 21:37, 31 July 2007 (UTC)
In summary, here is my latest suggestion for these issues. (1) Keep a page like the one that is currently called 'information economics'. That page should discuss information as a public good, asymmetric information and contract theory, and applications of the above to information technology. It should provide a link to the much more detailed contract theory page. We could call this page 'Information economics' or 'Economics of information' or 'Information in economic theory' if you really insist that the other two are neologisms. (2) Create a disambiguation page, with a title to be decided later, with links to the main 'Information economics' page, and to 'Contract theory', and to 'Economics of information technology' and to some of the business-related fields that have been linked to the 'information economics' page. What do y'all think? --Rinconsoleao 23:45, 31 July 2007 (UTC)
Good ideas. Information economics or economics of information could along the above lines be used as synonyms, indicated by bolding in the first few words of the Lead. The usage of Information in JEL code D8) should guide usage, as is presently the caee for the article. Then the usage of the JEL classification codes guides editors & satisfies Wikipedia:Verifiability]] policy. --Thomasmeeks
I really do insist that 'information economics' and 'economics of information' are neologisms. Also, based on the (mistaken) links incoming to those pages before a few days ago, I think that most people ending up at either of those pages would actually be interested in the pages on asymmetric information or contract theory. I'd also like to note that the Nobel Prize committee subordinates "information economics" to asymmetric information. This Joe Stiglitz article seems to me to be the strongest reason to keep real content in an 'information economics' article-- but Stiglitz refers exclusively to examples of asymmetric information. As a separate observation, much of the business-related stuff could be organized under the heading The information economy. Summarizing, I continue to think that information economics should be a redirect to asymmetric information or a disambiguation page. Jeremy Tobacman 04:52, 1 August 2007 (UTC)
There are really two issues here. One is which pages we need, and the other is what they should be called. It seems all three of us in this discussion agree that there needs to be a disambiguation page on issues that might possibly be the goal when someone does a search that includes both 'information' and 'economics'. I don't yet know how to create a disambiguation page... when I figure it out I will start one, unless you folks get there first. We can then discuss exactly what the disambiguation page should be called. --Rinconsoleao 07:04, 1 August 2007 (UTC)
Thomas, I should also note that less should be read into the JEL codes. Those codes are slapped onto articles rather casually; they pertain specifically to academic articles, not to possible lay terms like 'information economics'; and in practice the contents of the resulting categories are often complete chaos. Our interest should be in trying to get readers to the articles they're most likely interested in, not in fidelity to these codes. That's why earlier I proposed linking "Information, Knowledge, and Uncertainty" to Expected utility. However, I would think a reasonable altnerative would be to create Information, Knowledge, and Uncertainty and try to make it a top-level article for this material, linking each (brief) section and subsection to the main article for each of the dozen or so topics we've been discussing on these talk pages. Jeremy Tobacman 04:52, 1 August 2007 (UTC)
It's true that JEL codes are pretty chaotic, because economics has progressed so much in recent years that the consensus about the main fields is very different now from when the codes were first established. Nonetheless, I think D8 is not such a bad grouping, and gets pretty close to what some people mean (like the Urs Bircler book I referenced earlier) when they say 'Economics of information' in a broad sense. So I like the idea of calling this page Information, knowledge, and uncertainty in economics. (Adding 'in economics' is essential because otherwise we really are going to confuse some searchers.) But I would again say that having such a page - one that discusses 'information economics' in a broad sense - is more important than exactly what it's called. --Rinconsoleao 07:25, 1 August 2007 (UTC)

Well, I don't regard George Stigler's use of the term "economics of information" (“The Economics of Information,” Journal of Political Economy, June, 1961. (JSTOR)) or later, broader uses along the same lines as esp. new or pernicious. "Infomation economics" is just shorthand and well-attested in use by professionals as maintained on Talk:Economics#Information economics as broader term than Contract theory. It is a broad term of course but can convey a lot with a little. As for the JEL codes, let's not shoot the piano player but exploit for conveying as much as the article can consistent with Wiki policy. It seems to me that the advantage of keeping the current name is to impart what can be imparted in this article with links to other articles that have deeper treatments. If the article were renamed 'Information, knowledge, and uncertainty in economics', that would clearly define its parameters. But I believe that a more practical step might be to reference the term in the presently named article. The conciseness of 'information economics' is its biggest advantage, which tames a term othewise given to imprecision.

I appreciate concerns about neologisms and more precise professional uses. But others besides scholars should have steppingstones to the more specialized uses and learn something along the way. And when scholars use 'information economics' to speak to other scholars, doesn't that tell us something? Here's is a suggestive experimental tidbit. An Advanced Google Scholar search of:

lemon Akerlof

yields 1000+ papers An Advanced Google Scholar search of:

"information economics" Akerlof yields 500+ papers

almost half of the first search. That's too wide a usage from professionals to dismiss in attaching informative content to 'information economics', so I believe. Rather let our edits help dispel darkness and uninformation for lightness and information as painlessly as possible, consistent with Wiki policy. --Thomasmeeks 18:39, 1 August 2007 (UTC)

Stigler's article is about the very specific topic of search, and is an excellent example of why I think economics of information is likely to be confusing or misleading. (He uses that phrase descriptively, not as jargon.) Jeremy Tobacman 20:02, 1 August 2007 (UTC)

But I don't expect that we'll agree (I still prefer Information, knowledge, and uncertainty or Information, knowledge, and uncertainty in economics). So how are we going to proceed? Can we turn information economics into a dab page for now, and then consider attempting to flesh that collection of disambiguated topics out, a paragraph or two each, into a full article, deferring the decision about that article's title? Jeremy Tobacman 20:02, 1 August 2007 (UTC)

Excuse me, Wikifolk, is "dab" just an abbreviation for "disambiguation", or does it mean something else? --Rinconsoleao 11:03, 2 August 2007 (UTC)
Yes, you have it right. I was surprised, too, when I first (just recently) saw the usage. Jeremy Tobacman 11:36, 2 August 2007 (UTC)
It is not reassuring to ignore common uses of "information economics" by professionals, including the Britannica article on Economics (which is far from suggesting that only those aspects of information economics discussed exhaust the subject). The issue here should be usage. JEL code D8 is the best instrument for clarification of the term in question that the American Economic Association can come up with yet. Why should Wiki editors proceed as though they know better? Yes, "economics of information" and "information economics" are descriptive uses, not jargon. And a good thing too. But isn't it reasonable to make as much sense as possible from the term using the JEL codes as a guide? --Thomasmeeks 22:14, 1 August 2007 (UTC)
The title of JEL code D8 is "Information, knowledge, and uncertainty." I would think the best way to be faithful to that code would be with an article of the same title. My interpretation is that academic economists have thoroughly chopped up anything that might be called "information economics" into a collection of more specific, precise topics. But I realize now that I don't understand what exactly you're proposing that an article titled Information economics look like. If it would include a bit of broad description and then sections on asymmetric information, contract theory, principal-agent problems, network effects, innovation, patents, non-rival goods, search theory, expected utility, global games, and Bayesian inference, all of which link using Template:Main, that would probably be ok. Jeremy Tobacman 23:49, 1 August 2007 (UTC)
Well, Rinconsoleao's 07:25, 1 August 2007 suggestion in that direction is "Information, knowledge, and uncertainty in economics," quite a mouthful. "Information" permeates the treatment of the other terms there & in that sense is essential to every subcateogory of JEL: D8 ("Information, knowledge, and uncertainty"). Common professional usage is consistent with the shorter term 'information economics'. Rinconsoleao states above that "the New Palgrave (2008) will have an article on 'information economics' by Stiglitz, separately from the articles on 'contract theory' by Martimort and 'asymmetric information' by Postlethwaite." I don't think that Wiki has to wait for Stiglitz's article to infer a broader usage consistent with JEL: D8. I'd be happy to see an article that is taxonomically exhaustive as to JEL: D8, but it can fall short of that & still be very good. --Thomasmeeks 15:18, 2 August 2007 (UTC)
Ok, I'll give something along these lines a shot. (As an aside, this article by Stiglitz may foreshadow his forthcoming New Palgrave usage.) Jeremy Tobacman 12:49, 4 August 2007 (UTC)
If I may ask, what do you mean by your first sentence? If it is a taxonomic treatment of "Information, knowledge, and uncertainty in economics" that preserves this article title, I believe that there would be broad support for that. If it is something else, would you be willing to share what that is? --Thomasmeeks 16:04, 4 August 2007 (UTC)
(revised comment-- sorry, I'd misread.) Taxonomic treatment: Yes, exactly. Article title: I think there's still disagreement about what it should be called. It would be useful to have more opinions about this-- so far I only count three people who have weighed in, with three different opinions, implying to me that no conclusion has "broad support." I also haven't yet seen any outside sources that use the term "information economics" in as broad a sense as it seems we've been discussing (though I don't have access to the cited textbooks). Here's what I have so far for a draft.Jeremy Tobacman 16:13, 4 August 2007 (UTC)
Thank you for clarifying, Jeremy Tobacman. (To new line.)
1T. There seems to be agreement that nothing in JEL: D8 must be excluded in principle from this article.
2T. There might be agreement that nothing outside JEL: D8 should be included.
3T. There might also be agreement that nothing substantive in the article currently needs to be excluded.
Is there any disagreement on these points? --Thomasmeeks 22:15, 4 August 2007 (UTC)
I think JEL D8 is a little bit broader than information economics, but I think we can write a coherent survey of either one. See my comments below. --Rinconsoleao 22:27, 5 August 2007 (UTC)
I don't view the JEL codes as sacrosanct, but I think that JEL D8 is more than acceptable as a guideline for article content in this case. (Basically I agree with your first two points.) Regarding #3, could you clarify? Are referring to the specific details in the article as currently written, or to the topic areas in the article? I think the resulting article should lean heavily on the articles on the subtopics, since those are more clearly understood, and can be more clearly explained. What do you think of the outline/sketch I drafted? Jeremy Tobacman 23:04, 4 August 2007 (UTC)
Well, if there's fluff, even if well-intended, that's not protected of course. The topic areas are what I had in mind in keeping. Rather than comment of what you've written, I hope wouldn't mind me staying general. I believe survey articles (including the Stiglitz online source you cited are good places to start. There may be surveys in books or journals accessible in a good research library or with JSTOR searchable with EconLit or Google Scholar (papers) (accessible through JEL codes). I'm quite sure you know all that, but I'm just trying say that the stuff is already out there. The best Wiki article is totally derivative but reflecting Wikipedia:Verifiability. I admire your willingness to share your enthusiasm and knowledge, tempered by WP:NPOV of course. On what's in the article now, if there's something that is not well-expressed but could be better expressed, that might be a reason for not throwing it out in toto. I find that many portions of articles are like that. I hope that you too are a believer in the principle of charity. I've scanned your drafts but will try to give further comments as time permits. --Thomasmeeks 23:46, 4 August 2007 (UTC)
I just found more synonyms for the same concept: Agency Theory, Contract Theory, Principal-Agent Theory, Information Economics, Theory of Incentives; Regulation using Incentives; Theory of the firm under asymmetric information, Economics of incomplete information. --Forich (talk) 23:00, 16 February 2009 (UTC)
These are obviously not all synonyms. For example, 'Theory of the firm under asymmetric information' can't be a synonym for 'principal-agent theory', since principal-agent theory is applied to some contexts (like moral hazard in insurance contracts) that have nothing to do with the structure of the firm, and the theory of the firm under asymmetric information includes many models that have nothing to do with principal-agent theory. So these are related concepts, not synonyms. The problem with this whole discussion is that we are trying to neatly tie up an enormous body of research that is important and influential mutually related, but is constantly growing and changing. I think what Stiglitz tries to do when he talks about 'information economics' is to give an appropriately broad term for a broad field, and I think 'contract theory' is somewhat narrower. --Rinconsoleao (talk) 11:42, 17 February 2009 (UTC)
Agreed. Nonetheless, I'm starting a section here on the etymology of each concept. Perhaps it'll shed some light on this. --Forich (talk) 19:02, 17 February 2009 (UTC)

Another suggested lead[edit]

There are two nice possible leads for this article on Tobacman's page. Here is an alternative, if we call it "information economics" or "economics of information". Note that the way I order topics in this lead is basically chronological, and I think it would be helpful to be somewhat chronological in the article too. I'm also trying to suggest how we can group many of the topics we have mentioned. --Rinconsoleao 22:24, 5 August 2007 (UTC) (Further unsigned paragraphs below are mine.)

LEAD 2B. Information economics, or "the economics of information," is a broad term used to refer to a variety of topics in economics relating to the value of information, the effects of information on economic decisions and outcomes, and the strategic implications when economic agents have differing information, which have been some of the most important areas of economic research in recent decades. At least four broad topics are treated in information economics. First, it has long been recognized that information is a public good, and therefore potentially difficult to trade on private markets. Second, economists have studied optimal search for the best price out of a distribution of prices, and also what determines the distribution of prices for any particular good, and whether private markets efficiently aggregate information through prices. Third, economists have found that asymmetric information, that is, differences in the information available to different economic players, have profound effects on the types of contracts into which those players can and will enter. Fourth, the economics of information technology is a topic of obvious importance today, and both the public nature of information and the existence of asymmetries of information have proved central to developing economic theories of the impact of information technology.

As for building on that lead... in the first main topic, should definitely tie in to transactions cost economics. Also cite Samuelson's classic paper on public goods. And I think we can find some old theorizing on patents.
In the second main topic, should tie in to search theory, and the distribution of prices, and Hayek's analysis of the economic calculation problem, and issues of revelation of information through prices in rational expectations equilibrium, including the Greenwald-Stiglitz results.
In the third main topic, we should mention moral hazard, adverse selection, and incomplete contracts. We should give a brief discussion but mostly send the reader off to read more about contract theory. We should mention that usage is somewhat unclear; that some economists appear to use 'information economics' or 'economics of information' as a synonym for 'contract theory', while others use it more broadly.
In the fourth main topic, we should mention network effects and bundling, and we should refer to Hal Varian's textbook for more ideas.

LEAD 1B? I keep changing my mind about whether it would be better to call the survey article "Information economics" or "Knowledge, uncertainty, and information in economics." If we use the longer title, then I think the article should be a little broader than Lead 2B indicated. In particular, we would also need to mention risk, risk aversion, and expected utility theory. (Of course, this is also an area where Stiglitz has made big contributions, so it should be quite easy to tie it in. This might just be included as a fifth main theme. Or we might in this case rearrange themes to follow JEL D8 more closely.) So... I haven't written a lead 1B, but if I did it would be like Lead 2B, but then trying to add some comments on modeling risk and risk aversion too. --Rinconsoleao 22:24, 5 August 2007 (UTC)

Knowledge, uncertainty, and information in economics would be better, if only to allow the inclusion of Frank Knight's Risk, Uncertianty, and Profit. Of course, this could open the door to too much material on uncertainty: Keynes, Schumpeter, Lachmann, Shackle... (DWM)
By the way, a really excellent reference that I have been reading off and on during this discussion is Stiglitz' Nobel lecture.. This makes very clear that Stiglitz, at least, regards information economics as going substantially beyond contract theory. Among other points, he makes a lot of connections to the second main topic I mentioned (search, and the efficiency of price distributions and of information revelation through the market). --Rinconsoleao 22:34, 5 August 2007 (UTC)
A good clearing house for research on information in economics is Hal Varian's web page "The Information Economy" http://www2.sims.berkeley.edu/resources/infoecon/. Cheers, Corebreeches 00:12, 6 August 2007 (UTC)

Disambiguation Redux[edit]

The previous section has started to drift into several (interesting) discussions -- I want to focus only on the question of disambiguation. Currently a wikipedia search on "information" returns (obviously) the page titled Information. Reading this page one discovers the link to an existing disambiguation page Information (disambiguation). If the outcome of this discussion is to indeed create a disambiguation page, then I would suggest that we use the existing page. This page could then be used to place link to pages relevant to those interested in the use of information in economics or management or information systems, etc. My sense is that disambiguation is the way to go. I'll reserve my comments regarding JEL codes and page titles for the prior section of this page. Corebreeches 20:43, 5 August 2007 (UTC)

Title of the article[edit]

I think "economics of information" is more consistent with standard usage than "information economics". Although the Stigler article, mentioned above, did not cover the entire field, it's referred to a lot in many contexts. Also, although it's scarcely a conclusive argument, "information economics" is an unappealing use of a noun as an adjective. While I'm here, I like the article, but there are a couple of crucial things missing. I've added a section linking to value of information and I note that there are a lot of associated articles that need links to the economics articles and categories. We also need something on info as a public good.JQ 08:02, 6 August 2007 (UTC)

In that regard, here is one comparison of the 2 terms. Advanced Searches with Google Scholar as to the JEL classification codes#Microeconomics JEL: D Subcategories classifications "JEL: D8 - Information, Knowledge, and Uncertainty" of the Journal of Economic Literature for professional papers published yielded:
2330 hits for JEL D8
42 hits for "Information economics" JEL D8
33 hits for "Economics of information" JEL D8.
When the search includes both terms ("information economics" "economics of information" JEL D8), there are 7 hits. Thus, the terms appear to be used mostly in an either-or-but-not-both way. In such broad scholarly works as those of Joseph Stiglitz, Jack Hirshleifer,[2] and Jacob Marshak[3] the terms are also used interchangeably. This is the case in Stiglitz's survey article "The Contributions of the Economics of Information to Twentieth Century Economics" [4] (2000). --Thomasmeeks 00:43, 10 August 2007 (UTC)

"Information econ" vs. "Econ of information" by JEL D8 subcategory[edit]

Other tidbits include the following by subcategory.

JEL: D80 - General
1390 hits for JEL D80
31 hits for "Information economics" JEL D80
32 hits for "Economics of information" JEL D80
JEL D81 - Criteria for Decision-Making under Risk and Uncertainty
3790 hits for JEL D81
23 hits for "Information economics" JEL D81
24 hits for "Economics of information" JEL D81
JEL: D82 - Asymmetric and Private Information
5930 hits for JEL D82
148 hits for "Information economics" JEL D82
86 hits for "Economics of information" JEL D82
JEL: D83 - Search; Learning; Information and Knowledge
3040 hits for JEL D83
40 hits for "Information economics"
120 hits for "Economics of information" JEL D83
JEL: D84 - Expectations; Speculation
1110 hits for JEL D84
9 hits for "Information economics" JEL D84
120 hits for "Economics of information" JEL D84
JEL: D85 - Network Formation
238 hits for JEL D85
4 hits for "Information economics" JEL D85
7 hits for "Economics of information" JEL D85
JEL: D86 - Economics of contract law
176 hits for JEL D86
2 hits for "Information economics" JEL D86
2 hits for "Economics of information" JEL D86
JEL: D89 - Other
278 hits for JEL D89
4 hits for "Information economics" JEL D89
4 hits for "Economics of information" JEL D89

They seem to be used in similar ways with the differences most apparent and significant for JEL D82, JEL D83, and JEL D84. But the terms leak like a sieve when it comes to fine-grained descriptions of any one area. They are descriptive terms, not jargon, as Jeremy Tobacman noted above. --Thomasmeeks 00:43, 10 August 2007 (UTC)

classic marginal cost pricing completely infeasible[edit]

I think this statement is overly strong--I'm not sure it's right even in principle. Lots of information goods are provided at zero cost. Also "infeasible" is a poor choice of words for an economics article, since it is clearly possible for Microsoft to give away Vista for nearly nothing. Maybe "unprofitable" instead? CRETOG8(t/c) 16:07, 16 September 2008 (UTC)

Some etymology of each concept related to the economics of information[edit]

1. Principal-agent
I did some research on JStor, and the earliest appeareance in the economics literature of principal-agent theory is in Arrow's (1968) article on AER. Arrow argues that:

... The principal-agent relation is very pervasive in all economies, and especially in modern ones; by definition the agent has been selected for his specialized knowledge and therefore the principal can never hope completely to check the agent's performance.

I'm pretty sure that, pre-1968, no one was aware of the bigger picture of the principal-agent theory, since Moral Hazard was not inmediately linked to Adverse Selection nor Signalling. Instead, it was treated as an isolated issue that belonged exclusively to the insurance markets. Therefore, the concept of Contract theory was also not known then. Checking the seminal paper of Arrow (1963) on AER -the one about medical care-, no mention is made of Principal-agent.

To-do: Some etymology from the insurance literature and/or Moral Hazard would be appreciated, since it seems to be the oldest trace of all the others definitions. --Forich (talk) 19:37, 17 February 2009 (UTC)

UPDATE on Principal-agent: I just found that lawyers have been using that notion, particularly within the common-law legal system. I wasn't aware of it, because I live in a civil-law country! It seems like there is a vast literature on the subject of Principals and agents. See Agency_(law).--Forich (talk) 14:28, 22 February 2009 (UTC)

UPDATE 2 on Principal-agent: McFadden (2008) identifies this area with Peter Diamond, Oliver Hart, Jean-Jacques Laffont, Eric Maskin, Jim Mirrlees and Sherwin Rosen. He calls it Principal/agent problems and the design of efficient contracts. He also stablishes that Incentive theory plays a major role in principal-agent problems. All this gives us more hints of what to do with the similar terminology found in Wikipedia. --Forich (talk) 01:30, 17 March 2009 (UTC)

2. Contract Theory
After some research on JStor, I traced the appeareance in the economics literature of the term Contract theory. It goes way back to the social contract thesis by Rawls. That was its first use, and it seems that nowadays, that literature is known as social contract theory. It is not related to principal-agent problems at all. Then, I discovered the whole Coase-Williamson literature, and even though they mention contracts, I think that they did not elaborate enough on principal-agent. The third line of thought I found was in Macroeconomics: Implicit contract theory, it was first elaborated by Baily around 1974. This is very close to the actual concept of contract theory because it deals with uncertainty but, again, no explicit mention of principal-agent problems is made. It seems to me that the ground-breaking paper that explored contracts in a modern way was Grossman and Hart 1981 paper on AER, "Implicit contracts, Moral Hazard, and Unemployment". Notice from the paper's title that they won't stray too much from the implicit-contract-trend that was gaining momentum in the macroeconomics literature. In fact, they constantly refer to labor markets as their main subject of study, instead of economics of information.

Anyway, I hope that all this background checking can help to disentangle the Information-economics mess we have in Wikipedia.--Forich (talk) 18:20, 5 March 2009 (UTC)


3. Decentralized Resource allocation
In a Working Paper, McFadden (2008) posits that this area is constituted by the seminal contributions of Leo Hurcwicz and Jacob Marshak at the end of the 1950's, the contemporaneous contributions of Ken Arrow and Gerard Debreu, and parallel works by Bill Vickrey and Herbert Simon.

4. Assymetric information
McFadden(2008) identifies this area with studies by George Akerloff, Michael Spence and Joseph Stiglitz dealing with the role of information and communication. --Forich (talk) 01:24, 17 March 2009 (UTC)

5. Rivalrous information Financial information is often rivalrous, because of limited liquidity. A prominent example is given in the situation of flash trading, there are many others. —Preceding unsigned comment added by 68.198.4.213 (talk) 15:24, 24 October 2009 (UTC)

Tried to flesh out the section on information and the price mechanism[edit]

I added a reference to Hayek's The Use of Knowledge in Society to the section on information and the price mechanism. However, I wasn't sure if the citation needed was in reference to Hayek's contribution to information economics or to his influence of the authors listed at the end of the section so I left the citation needed and the reference to the authors. I'll try to see if I can find direct reference(s) to his influence of those authors.Trevallion42 (talk) 19:32, 22 April 2011 (UTC)

Dr. Duffy's comment on this article[edit]

Dr. Duffy has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


Good, brief survey


We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Duffy has published scholarly research which seems to be relevant to this Wikipedia article:


  • Reference : John Duffy & Felix Munoz-Garcia, 2010. "Signaling Concerns about Fairness: Cooperation under Uncertain Social Preferences," Working Papers 2010-19, School of Economic Sciences, Washington State University.

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