Information, Flexibility, and Value Added
Hennessy, David A.; Babcock, Bruce A.
Information Economics and Policy Vol. 10 (November 1998): 431-450.
Information technologies used in production activities facilitate the acquisition of more detailed and more timely information concerning the state of the production environment. While the effects of distribution shifts on decisions under uncertainty have been much studied, less is known about the effects of information acquisition on revenue generation and choice. In this article we consider the firm level impacts of information acquisition on revenue, on input use, and on profitability. A choice made under uncertainty depends upon the distribution of a random parameter but not upon its realization, while the choice depends only on the realization when this realization is known. Impacts are determined by interactions between second and third cross derivatives of the primal revenue function.Published Version