Comparative Statics of Information Acquisition and Risk Aversion
We study how willingness to pay for information depends on risk aversion when a decision maker faces background risk and can acquire information before choosing from a menu of assets. We distinguish investment menus, whose payoffs are procyclical with background wealth, from insurance menus, whose payoffs are countercyclical. Our main results show that the interaction between asset cyclicality and the tail geometry of background risk determines the direction of the comparative statics. When the density of background risk is log-concave, willingness to pay for information decreases with risk aversion for investment menus, whereas with downward-log-convex background risk it increases with risk aversion for insurance menus. The proofs compare the distributions of terminal wealth with and without information and develop new aggregation arguments for state-dependent single-crossing comparisons. We also construct reversals under strictly log-convex tails for investment menus and super-exponential left tails for insurance menus.
arXiv:2609.12149, 2026
Citation
@report{cabrales2026,
author = {Cabrales, Antonio and Curello, Gregorio and Gossner, Olivier
and Serrano, Roberto},
publisher = {arXiv},
title = {Comparative {Statics} of {Information} {Acquisition} and
{Risk} {Aversion}},
number = {2609.12149},
date = {2026},
url = {https://arxiv.org/abs/2609.12149},
doi = {10.48550/arXiv.2609.12149},
langid = {en},
abstract = {We study how willingness to pay for information depends on
risk aversion when a decision maker faces background risk and can
acquire information before choosing from a menu of assets. We
distinguish investment menus, whose payoffs are procyclical with
background wealth, from insurance menus, whose payoffs are
countercyclical. Our main results show that the interaction between
asset cyclicality and the tail geometry of background risk
determines the direction of the comparative statics. When the
density of background risk is log-concave, willingness to pay for
information decreases with risk aversion for investment menus,
whereas with downward-log-convex background risk it increases with
risk aversion for insurance menus. The proofs compare the
distributions of terminal wealth with and without information and
develop new aggregation arguments for state-dependent
single-crossing comparisons. We also construct reversals under
strictly log-convex tails for investment menus and super-exponential
left tails for insurance menus.}
}