CALIFORNIA UNIV LOS ANGELES WESTERN MANAGEMENT SCIENCE INST
An information system is defined as a chain of information services inquiring -- data-storing -- encoding -- transmitting -- decoding -- deciding. Each is a transformer represented, in general, by a stochastic matrix and a cost function. The inputs of inquiring are the benefit-relevant events possibly statistical parameters. Actions are outputs of deciding. Together, actions and events determine the benefits. Other outputs of a service are a inputs into the successive service, and b contributions to the cost of acquiring and operating the information system. The decision theory of economists and statisticians has usually neglected the subsequence data-storing -- encoding -- transmitting -- decoding. Communication engineers, on the other hand, have neglected the inquiring and deciding services and have usually equated benefit with the non-occurrence of error in the communication of data. The report attempts to clear up important misunderstandings and to achieve conceptual unity between, on the one hand, the economists and statisticians concerned with efficient decision and organization and, on the other, the communication engineers who have created what has come to be called information theory.