Asymmetric Information, Nonadditive Expected Utility, and the Information Revealed by Prices: An Example
Résumé
I develop a simple example of a model in which agents have asymmetric information, and preferences that are represented by a nonadditive expected utility function. The a priori uninformed agent, after observing the equilibrium price, has conditional beliefs that remain nonadditive. Then, even when the equilibrium price function is fully revealing (i.e., one-to-one), it may be worth-while for an a priori uninformed agent to buy `redundant' private information if he is more confident in that information than in that revealed by the price system.