Information Costs

Globalisation of economic activity has led to internationalisation of production and consumption. The manager must be aware of the latest developments in the industry in which he operates so as to make better decisions. He may have to make inventory capacity decisions, modify product line customise products to local tastes, and so on. With the advent of information economy creation of value is increasingly based on knowledge and communications rather than on natural resources and physical labour as in the past. For instance, computer-aided design (CAD) and computer-aided manufacturing (CAM) has increased producers' ability to produce several products for different markets. Spread of computer networks and IT speed up delivery of goods, decrease inventory, cuts wastes and generally increases productivity. Thus, in the present Age of Information, a manager has to incur costs

To acquire an information source that can help in forecasting, or

Acquire information that influences forecasts.

The decision maker should acquire the additional source or information only if its expected value (in making better decisions) exceeds its costs.

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