Valuing Information When Risk Preferences Are Nonneutral: An Application to Irrigation Scheduling

A method for valuing information when risk attitudes are nonneutral is presented. The procedure uses simulation and generalized stochastic dominance to value information by level of risk aversion. The value of soil water and weather information to irrigators is quantified to illustrate the procedure. The empirical results show that additional information has diminishing marginal returns for a given level of risk aversion and that the value of information increases with the level of risk aversion. The application demonstrates the importance of valuing information on a whole‐firm basis when returns to information are related to returns of other firm enterprises and risk preferences are nonneutral.