Complete information

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Full information (or perfect information ; English complete information ) lies in the economics front, when a decision or an economic subject knowledge of all past , present and future data , events and facts possesses.

General

Information is in the information theory , the existing, purpose-built knowledge of a decision-maker. The more knowledge he has, i.e. the more information he has, the more certain his decisions will be . The terms complete or perfect information were previously used as equivalent, Waldemar Wittmann used (in) perfect information in his standard work published in 1959. In game theory , instead of perfect information, a distinction is made between game with perfect information and game with complete information .

Complete information is an important premise for market participants in the perfect market and perfect capital market , described by William Stanley Jevons as early as 1871 :

“By a market I will understand two or more people [...] whose stocks of [...] goods and intentions to exchange are known to everyone. [...] The market only extends to the extent that this common knowledge extends. "

- William Stanley Jevons, Theory of political economy , 1871, pp. 82/83

Among other things, these markets only work if all market participants have complete market transparency with all market data and thus neither information costs nor transaction costs arise. The complete information about past, present and future events leads to complete market clearance for them . A lack of information means imperfect markets with incomplete information. Since information about future developments is usually missing, in reality, with a few exceptions, the information is almost always incomplete.

Information-oriented concept of risk

If the concept of risk is based on the information situation, the complete information is characterized by certainty and does not show any probability distribution . Imperfect information includes either a risk as a measurable uncertainty with a known probability distribution or an uncertainty with an unmeasurable uncertainty. The latter is divided into a subjective probability with an unknown probability distribution and no probability with the assumption of a uniform distribution. The complete information thus corresponds to the security , the incomplete information to the uncertainty , the latter in turn is divided into risk and uncertainty.

Expressions

Whether and to what extent transaction costs are incurred depends on the information available to economic entities:

  • If economic agents have complete information on market behavior and the environment , transactions are carried out at the equilibrium price without transaction costs. There are only "bogus transaction costs" such as transport costs or shipping costs .
  • If complete information on market behavior and incomplete knowledge of the environment is available, market participants can foresee how counterparties will behave in certain environmental conditions. Unforeseen shocks cause transaction costs even though there is complete knowledge of market behavior.
  • If there is incomplete information about behavior and complete information about the environment, there are transaction and information costs. The actors must check whether the costs of additional information acquisition can be justified by the achievable advantages.
  • Finally, there is the possibility of incomplete information about behavior and the environment with the relatively highest transaction costs.

Only transaction-relevant information about the market behavior of market participants and the transactional environment play a role. The extent to which information is complete or incomplete is measured by the degree of information.

Measurement

Whether information is missing can be read from the information level. The level of information measures the imperfection of information:

.

Complete information is therefore available at an information level of 100%, incomplete information between> 0 and 100% and complete ignorance at 0%. In cases of imperfect information or ignorance, the information is given some informational value and information costs are incurred. Information can also be distributed asymmetrically between different actors: some actors have complete information, other actors only have incomplete information or no information at all ( asymmetrical information ). The asymmetrical information is an unequal distribution of information and thus incomplete information. Most of the time, a decision maker will be able to collect all past and present information, but information about future developments or events will always be fraught with uncertainty. The knowledge of the probability of future environmental conditions occurring is defined as a risk in decision theory.

The lower the level of information, the higher the risk of making a wrong decision and vice versa. Risks are associated with decisions made under uncertainty , for which one knows the possible environmental conditions, but cannot state the probability of their occurrence. Their subspecies Decision under Risk , in which the decision maker knows the probabilities of the occurrence of the possible environmental conditions, is also associated with risk. Classic example of a Decision under security is arbitrageur , which all market data ( stock prices , market prices , market interest rates ) are present at the time of arbitrage.

Applications

Complete information is a fundamental axiom of many models of economic theory . For example, all economic subjects could be fully informed about the offers of all other economic subjects, i.e. they could know their offers and their prices from everyone else at all times . Such an analysis can lead to an equilibrium in the context of neoclassics .

The New Institutional Economics deals critically with the microeconomic assumption of complete information and uses behavioral concepts.

With the emergence of the Internet as a medium , information costs were extremely reduced, at least in sub-markets and special situations. The Internet economy is therefore also concerned with the extent and procurement costs of information .

The market efficiency hypothesis, for example, distinguishes three levels of information efficiency .

Delimitations

In game theory in particular , various similar concepts are used. In this area, there is usually no absolutely complete information meant to know everything at all times. For various models, it is sufficient to know with certainty a certain probability that an event will occur. Game theory also deals with different variants of the decision under uncertainty .

Perfect information

In game theory, a distinction is made between a game with complete information and a game with perfect information , or between the concepts of complete and perfect information.

In games with perfect information, each player always has the previous game event at the time of a decision, i.e. H. the previously made decisions of his teammates as well as the previously made random decisions, fully known. Examples of games with perfect information are board games such as chess , mill, and backgammon . Counterexamples are card games such as skat and poker as well as games with simultaneous moves such as scissors, stone, paper .

Complete information in the sense of game theory (i.e. perfect information) already exists if the actual payout amount is not known, but its probability distribution is known to all players. However, some authors describe the property of perfect information, deviating from the scientific standard, as complete information . Sometimes, but in very few cases, the perfect information is viewed as an extension of the complete information.

Other authors call the information about all past, present and future facts and events only perfect information and describe complete information as a subset of which at least the game is known with all the rules, but not necessarily the previous decisions of other players.

Common Knowledge

Common knowledge is information or events that every player knows and of which everyone also knows that they are known to everyone else, and also that everyone in turn knows that everyone knows that they are known to everyone, etc. The knowledge of the players is nested with each other infinitely.

This assumption is of course fiction. Their justification is to reduce the complexity of economic decision-making situations, for example in order to recognize the effects of the influencing variables identified as essential. Complete information is the most restrictive assumption about the degree of perfection of economic facts.

Individual evidence

  1. ^ Waldemar Wittmann, Entrepreneurship and Imperfect Information , 1959, p. 18
  2. ^ Christian Rieck : Game Theory , Gabler, Wiesbaden 1993, ISBN 3-409-16801-X , p. 95.
  3. ↑ Gustav Dieckheuer (Ed.), Contributions to applied microeconomics: Jochen Schumann on his 65th birthday , 1995, p. 157
  4. ↑ Christian Brunger, benefits Consistent risk prioritization , 2011, p 9 f.
  5. ^ Edgar Saliger, Business Decision Theory , 2003, p. 16
  6. ↑ Josef Windsperger, Transaction Costs and the Organizational Design of Coordination Mechanisms , in: Erik Boettcher / Philipp Herder-Dorneich / Karl-Ernst Schenk (eds.), The contract theory as the basis of parliamentary democracy, Volume 4, 1985, p. 201
  7. ↑ Josef Windsperger, Transaction Costs and the Organizational Design of Coordination Mechanisms , in: Erik Boettcher / Philipp Herder-Dorneich / Karl-Ernst Schenk (eds.), The contract theory as the basis of parliamentary democracy, Volume 4, 1985, p. 201
  8. ↑ Josef Windsperger, Transaction Costs and the Organizational Design of Coordination Mechanisms , in: Erik Boettcher / Philipp Herder-Dorneich / Karl-Ernst Schenk (Eds.), The Contract Theory as Basis of Parliamentary Democracy, Volume 4, 1985, p. 202
  9. ↑ Heiko Staroßom, Corporate Finance , Part 1, 2013, p. 115
  10. ↑ Uta Meeder, Measurement of Advertising Effectiveness on the Internet: Perception, Attitude and Moderating Effects , Springer-Verlag Berlin, 2007, p. 126.
  11. ↑ Meinolf Lombino / Olaf Fischer, Economics for bankers: in a nutshell, everything relevant to the exam summarized , Springer-Verlag Berlin, 2010.
  12. ^ Alfred Endres: Environmental Economics: Textbook. W. Kohlhammer Verlag, 2007. p. 107.
  13. ↑ Elwyn R. Berlekamp / John H. Conway / Richard K. Guy : Winning. Braunschweig, 1985, Volume 1, ISBN 3-528-08531-2 , p. 16. The original version Winning Ways speaks of complete information .
  14. ^ Andreas Diekmann et al, Rational Choice: Theoretical analyzes and empirical results , Festschrift for Karl-Dieter Opp on the 70th, 2008, p. 8 f.
  15. ↑ Ulrich FH Andree: Profitability Analysis of Public Investment Projects: Plan investments safely and reliably. Haufe-Lexware, 2011, p. 290.
  16. ↑ Manfred J. Holler / Gerhard Illing: Introduction to game theory . 6th edition. Springer Verlag, Berlin 2005, ISBN 3-540-27880-X , p. 42 f .
  17. ^ Sibylle Brunner / Karl Kehrle: Volkswirtschaftslehre , Vahlen, 2012, p. 179.
  18. ^ Emil-Maria Claassen, Fundamentals of Monetary Theory , Springer-Verlag Berlin, 2013, p. 107.