When are signals complements or substitutes?
AbstractThe paper introduces a notion of complementarity (substitutability) of two signals which requires that in all decision problems each signal becomes more (less) valuable when the other signal becomes available. We provide a general characterization which relates complementarity and substitutability to a Blackwell comparison of two auxiliary signals. In a setting with a binary state space and binary signals, we find an explicit characterization that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to more general settings. We also illustrate the implications of our concepts for three economic applications: information disclosure in auctions, information aggregation through voting, and polarization of beliefs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 148 (2013)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622869
Complementarity; Substitutability; Value of information; Blackwell ordering;
Other versions of this item:
- Tilman Borgers & Angel Hernanco-Veciana & Daniel Krohmer, 2010. "When are Signals Complements or Substitutes," Discussion Papers 1488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Tilman Borgers & Angel Hernando-Veciana & Daniel Krahmer, 2007. "When are signals complements or substitutes?," Economics Working Papers we072111, Universidad Carlos III, Departamento de Economía.
- Börgers, Tilman & Hernando-Veciana, Angel & Krähmer, Daniel, 2010. "When are Signals Complements or Substitutes?," MPRA Paper 29124, University Library of Munich, Germany.
- C00 - Mathematical and Quantitative Methods - - General - - - General
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 165-191, 01.
- Paul Milgrom & Robert J. Weber, 1981.
"The Value of Information in a Sealed-Bid Auction,"
462, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Timothy Feddersen & Wolfgang Pesendorfer, 1997.
"Voting Behavior and Information Aggregation in Elections With Private Information,"
Levine's Working Paper Archive
1560, David K. Levine.
- Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, vol. 65(5), pages 1029-1058, September.
- Timothy Feddersen & Wolfgang Pesendorfer, 1994. "Voting Behavior and Information Aggregation in Elections with Private Information," Discussion Papers 1117, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 165-191.
- Péter Kondor, 2005. "The more we know, the less we agree: public announcements and higher-order expectations," FMG Discussion Papers dp532, Financial Markets Group.
- Dow, James & Gorton, Gary, 1993. "Trading, Communication and the Response of Asset Prices to News," Economic Journal, Royal Economic Society, vol. 103(418), pages 639-46, May.
- Schmitz, Patrick W. & Tröger, Thomas, 2011.
"The (sub-)optimality of the majority rule,"
32716, University Library of Munich, Germany.
- James Andreoni & Tymofiy Mylovanov, 2012. "Diverging Opinions," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 209-32, February.
- Jonathan Levin & Susan Athey, 2001.
"The Value of Information in Monotone Decision Problems,"
01003, Stanford University, Department of Economics.
- Susan Athey & Jonathan Levin, 1998. "The Value of Information In Monotone Decision Problems," Working papers 98-24, Massachusetts Institute of Technology (MIT), Department of Economics.
- Miklos Sarvary & Philip M. Parker, 1997. "Marketing Information: A Competitive Analysis," Marketing Science, INFORMS, vol. 16(1), pages 24-38.
- Nicola Persico, 1997.
"Information Acquisition in Auctions,"
UCLA Economics Working Papers
762, UCLA Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.