Entropy and the value of information

Decision analysis and information theory have developed different approaches to measure the value of information. The objective of this paper is to study similarities of the approaches developed in both disciplines and to analyze whether the measure of entropy developed in information theory can also be useful in a decision-making context. We first study the relationship of the two concepts for simple decision problems using an analytical model. Results of this model are used to derive hypotheses, which are analyzed for more complex decision problems via simulation. The simulation results indicate that, while a relationship between entropy and the value of information exists, it is more complex than the results from the analytical model suggest.