When Information Acquisition Moves the Market

When does passive valuation choose wrong?

A passive value-of-information calculation holds downstream execution fixed. In dealer markets, requesting another quote can reveal intent or alter dealer response. The work asks when passive information valuation therefore chooses the wrong inquiry or routing policy.

Sensing versus acquisition.

The analysis distinguishes an observation-only scalar sensing adjustment from an acquisition action that changes downstream action values. Exact scalar representation is possible only when the inquiry-induced perturbation is constant across downstream actions for a realized observation. A routing change is a direct policy-level certificate that the passive and endogenous formulations are not equivalent.

Exact enumeration, fresh holdout.

Exact experiments.

Finite decision problems are solved by exact enumeration. The empirical component uses heterogeneous parameterized environments, exact 3–5 dealer extensions, a fresh 5,000-environment IID holdout, and predefined distribution shifts without changing the solver.

Exact enumeration; separated discovery/holdout seeds; frozen holdout ranges.

Mechanism diagnostics.

Making the inquiry response common across dealers removes routing mismatch. Restricting response intensity to a weak-response regime materially reduces breadth mismatch, while larger orders or shallower liquidity amplify it. This directionality is more informative than a raw average gap.

Scope of the evidence.

Formal representability boundary; 10,080 heterogeneous tests; fresh 5,000-world IID holdout; mechanism controls and shifts.

Not a frequency estimate.

Artifact status.