The value of risk-reducing information.

Abstract

Abstract

This manuscript integrates the utility-increasing advantages of risk reductions into well-known value-of-information justifications for executive information systems (EIS). Accordingly, even some EISs which never pay for themselves financially can be advantageous if they sufficiently reduce the uncertainty of net income for "risk averse" hospitals. The manuscript demonstrates the potential importance of risk reductions in the context of a hypothetical hospital administrator charged with selecting among alternative managed care contracts, each with uncertain outcomes. An administrator representing a hospital with diminishing marginal utility from income, a standard interpretation of risk-aversion, may find that an otherwise unprofitable EIS reduces income variations (risk) sufficiently to justify its purchase.

Department

Health Management and Policy

Publication Date

6-1994

Journal Title

Journal of Medical Systems

Publisher

Springer

Digital Object Identifier (DOI)

10.1007/BF00997289

Document Type

Article

Rights

© 1994 Plenum Publishing Corporation.

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