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Endogenous Information Acquisition in Coordination Games

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  • David P. Myatt
  • Chris Wallace

Abstract

In the context of a "beauty-contest" coordination game (in which pay-offs depend on the quadratic distance of actions from an unobserved state variable and from the average action), players choose how much costly attention to pay to various informative signals. Each signal has an underlying accuracy (how precisely it identifies the state) and a clarity (how easy it is to understand). The unique linear equilibrium has interesting properties: the signals which receive attention are the clearest available, even if they have poor underlying accuracy; the number of signals observed falls as the complementarity of players' actions rises; and, if actions are more complementary, the information endogenously acquired in equilibrium is more public in nature. The consequences of "rational-inattention" constraints on information transmission and processing are also studied. Copyright 2012, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 79 (2012)
Issue (Month): 1 ()
Pages: 340-374

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Handle: RePEc:oup:restud:v:79:y:2012:i:1:p:340-374

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  1. Christian Hellwig, 2004. "Heterogeneous Information and the Benefits of Public Information Disclosures (October 2005)," UCLA Economics Online Papers, UCLA Department of Economics 283, UCLA Department of Economics.
  2. Christian Hellwig & Laura Veldkamp, 2006. "Knowing what others Know: Coordination motives in information acquisition," 2006 Meeting Papers, Society for Economic Dynamics 361, Society for Economic Dynamics.
  3. Torun Dewan & David P. Myatt, 2007. "The Qualities of Leadership:Direction, Communication, and Obfuscation," STICERD - Political Economy and Public Policy Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 24, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Jeffery D. Amato & Hyun Song Shin & Stephen Morris, 2003. "Communication and monetary policy," BIS Working Papers, Bank for International Settlements 123, Bank for International Settlements.
  5. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, American Economic Association, vol. 63(3), pages 326-34, June.
  6. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1521-1534, December.
  7. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, Econometric Society, vol. 75(4), pages 1103-1142, 07.
  8. George-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," NBER Working Papers 10391, National Bureau of Economic Research, Inc.
  9. Stephen Morris & Hyun Song Shin, 2005. "Central Bank Transparency and the Signal Value of Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 1-66.
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Cited by:
  1. George-Marios Angeletos & Guido Lorenzoni & Alessandro Pavan, 2010. "Beauty Contests and "Irrational Exuberance": A Neoclassical Approach," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1502, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Meyer, Margaret A & Strulovici, Bruno, 2013. "The Supermodular Stochastic Ordering," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9486, C.E.P.R. Discussion Papers.
  3. James, Jonathan G. & Lawler, Phillip, 2012. "Heterogeneous information quality; strategic complementarities and optimal policy design," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 83(3), pages 342-352.
  4. Tomoya Nakamura, 2014. "One-Leader and Multiple-Follower Stackelberg Games with Private Information," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0908, Institute of Social and Economic Research, Osaka University.
  5. Antonella Tutino & Anton Cheremukhin, 2012. "Asymmetric Firm Dynamics under Rational Inattention," 2012 Meeting Papers, Society for Economic Dynamics 161, Society for Economic Dynamics.
  6. Kyriazis, Nicholas & Metaxas, Theodore, 2013. "The emergence of democracy: a behavioural perspective," MPRA Paper 47146, University Library of Munich, Germany.
  7. Jeanne Hagenbach & Frédéric Koessler, 2011. "Full Disclosure in Decentralized Organizations," PSE Working Papers, HAL halshs-00652279, HAL.
  8. Ui, Takashi, 2014. "The Social Value of Public Information with Convex Costs of Information Acquisition," Discussion Papers, Graduate School of Economics, Hitotsubashi University 2014-05, Graduate School of Economics, Hitotsubashi University.
  9. Andreas Blume & Peter H. Kriss & Roberto A. Weber, 2011. "Pre-Play communication with forgone costly messages: experimental evidence on forward induction," ECON - Working Papers, Department of Economics - University of Zurich 034, Department of Economics - University of Zurich, revised Sep 2014.
  10. Ryan Chahrour, 2014. "Public Communication and Information Acquisition," American Economic Journal: Macroeconomics, American Economic Association, American Economic Association, vol. 6(3), pages 73-101, July.
  11. repec:hal:wpaper:hal-00753473 is not listed on IDEAS
  12. Jeanne Hagenbach & Frédéric Koessler & Eduardo Perez‐Richet, 2014. "Certifiable Pre‐Play Communication: Full Disclosure," Econometrica, Econometric Society, Econometric Society, vol. 82(3), pages 1093-1131, 05.
  13. Toni Ahnert & Ali Kakhbod, 2014. "Information, Amplification and Financial Crisis," Working Papers, Bank of Canada 14-30, Bank of Canada.
  14. repec:hal:wpaper:halshs-00652279 is not listed on IDEAS
  15. Ryan A Chahrour, 2011. "Transparency and Costly Information Acquisition," 2011 Meeting Papers, Society for Economic Dynamics 1221, Society for Economic Dynamics.

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