Economic Considerations in Response Research

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Abstract
The general neglect of economic considerations in response research is noted. Following the listing of several factors which influence investment in response research, a framework is developed in which knowledge of a process is viewed in terms of the expected value and variance of profits. A Bayesian scheme for incorporating additional information in posterior analysis is outlined. Worth of additional information is judged in terms of utility. The scheme is used to show how the value of obtaining additional information can be ascertained ex ante in preposterior analysis by way of a Monte‐Carlo approach. Both posterior and preposterior analyses are illustrated through a soybean‐fertilizer process. In this empirical example, the effects of using different experimental designs of varying size are examined.

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