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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. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  2. Torun Dewan & David P. Myatt, 2007. "The Qualities of Leadership:Direction, Communication, and Obfuscation," STICERD - Political Economy and Public Policy Paper Series 24, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Stephen Morris & Jeffery D. Amato & Hyun Song Shin, 2004. "Communication and Monetary Policy," Yale School of Management Working Papers ysm345, Yale School of Management.
  4. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, vol. 75(4), pages 1103-1142, 07.
  5. Christian Hellwig & Laura Veldkamp, 2006. "Knowing what others Know: Coordination motives in information acquisition," 2006 Meeting Papers 361, Society for Economic Dynamics.
  6. 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, vol. 36(2), pages 1-66.
  7. 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.
  8. Christian Hellwig, 2004. "Heterogeneous Information and the Benefits of Public Information Disclosures (October 2005)," UCLA Economics Online Papers 283, UCLA Department of Economics.
  9. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
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Citations

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Cited by:
  1. George-Marios Angeletos & Guido Lorenzoni & Alessandro Pavan, 2010. "Beauty Contests and Irrational Exuberance: A Neoclassical Approach," Levine's Working Paper Archive 661465000000000237, David K. Levine.
  2. Ui, Takashi, 2014. "The Social Value of Public Information with Convex Costs of Information Acquisition," Discussion Papers 2014-05, Graduate School of Economics, Hitotsubashi University.
  3. Jeanne Hagenbach & Frédéric Koessler & Eduardo Perez-Richet, 2012. "Certifiable Pre-Play Communication: Full Disclosure," PSE Working Papers hal-00753473, HAL.
  4. Jeanne Hagenbach & Frédéric Koessler, 2011. "Full Disclosure in Decentralized Organizations," PSE Working Papers halshs-00652279, HAL.
  5. Antonella Tutino & Anton Cheremukhin, 2012. "Asymmetric Firm Dynamics under Rational Inattention," 2012 Meeting Papers 161, Society for Economic Dynamics.
  6. Margaret Meyer & Bruno Strulovici, 2013. "The Supermodular Stochastic Ordering," Discussion Papers 1563, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. repec:hal:wpaper:halshs-00652279 is not listed on IDEAS
  8. Ryan Chahrour, 2012. "Public Communication and Information Acquisition," Boston College Working Papers in Economics 803, Boston College Department of Economics.
  9. repec:hal:wpaper:hal-00753473 is not listed on IDEAS
  10. Peter H. Kriss & Andreas Blume & Roberto A. Weber, 2011. "Coordination, efficiency and pre-play communication with forgone costly messages," ECON - Working Papers 034, Department of Economics - University of Zurich.
  11. James, Jonathan G. & Lawler, Phillip, 2012. "Heterogeneous information quality; strategic complementarities and optimal policy design," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 342-352.
  12. Ryan A Chahrour, 2011. "Transparency and Costly Information Acquisition," 2011 Meeting Papers 1221, Society for Economic Dynamics.
  13. Kyriazis, Nicholas & Metaxas, Theodore, 2013. "The emergence of democracy: a behavioural perspective," MPRA Paper 47146, University Library of Munich, Germany.

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