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Communication and Learning

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  • Luca Anderlini
  • Dino Gerardi
  • Roger Lagunoff

Abstract

We study strategic information transmission in an organization consisting of an infinite sequence of individual decision-makers. Each decision-maker chooses an action and receives an informative but imperfect signal of the once-and-for-all realization of an unobserved state. The state affects all individuals' preferences over present and future decisions. Decision-makers do not directly observe the realized signals or actions of their predecessors. Instead, they must rely on cheap-talk messages in order to accumulate information about the state. Each decision-maker is therefore both a receiver of information with respect to his decision and a sender with respect to all future decisions. We show that if preferences are not perfectly aligned, "full learning" equilibria--ones in which the individuals' posterior beliefs eventually place full weight on the true state--do not exist. This is so both in the case of private communication, in which each individual only hears the message of his immediate predecessor, and in the case of public communication, in which a decision-maker hears the message of all his predecessors. Surprisingly, in the latter case full learning may be impossible even in the limit as all members of the organization become perfectly patient. We also consider the case where all individuals have access to a mediator who can work across time periods arbitrarily far apart. In this case, full learning equilibria exist. 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): 2 ()
Pages: 419-450

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Handle: RePEc:oup:restud:v:79:y:2012:i:2:p:419-450

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  1. Roger Lagunoff & Akihiko Matsui, 2001. "Organizations and Overlapping Generations Games: Memory, Communication, and Altruism," Working Papers 1, Georgetown University, Department of Economics.
  2. Mikhail Golosov & Vasiliki Skreta & Aleh Tsyvinski & Andrea Wilson, 2011. "Dynamic Strategic Information Transmission," Working Papers 11-17, New York University, Leonard N. Stern School of Business, Department of Economics.
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  4. Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Game Theory and Information 9902003, EconWPA.
    • Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
    • Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. FORGES, Françoise, . "An approach to communication equilibria," CORE Discussion Papers RP -721, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, September.
  7. Luca Anderlini & Roger Lagunoff, 2005. "Communication in dynastic repeated games: ‘Whitewashes’ and ‘coverups’," Economic Theory, Springer, vol. 26(2), pages 265-299, 08.
  8. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2007. "Social Memory and Evidence from the Past," Working Papers gueconwpa~07-07-01, Georgetown University, Department of Economics.
  9. Hajime Kobayashi, 2007. "Folk Theorems For Infinitely Repeated Games Played By Organizations With Short-Lived Members," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 517-549, 05.
  10. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
  11. Marco Ottaviani & Peter Sorensen, 1999. "Professional Advice," Game Theory and Information 9906003, EconWPA.
  12. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  13. David Spector, 1999. "Rational debate and one-dimensional conflict," Working papers 99-09, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Roger Lagunoff, 2002. "Credible Communication in Dynastic Government," Working Papers gueconwpa~02-02-04, Georgetown University, Department of Economics.
  15. Giuseppe Moscarin & Marco Ottaviani & Lones Smith, . "Social Learning in a Changing World," ELSE working papers 010, ESRC Centre on Economics Learning and Social Evolution.
  16. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
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Cited by:
  1. Petri Ruuskanen & Tomi Kankainen, 2011. "Dynamic capabilities in small and medium manufacturing firms in rural Finland – role of social capital?," ERSA conference papers ersa11p806, European Regional Science Association.
  2. Lagunoff, Roger, 2006. "Credible communication in dynastic government," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 59-86, January.
  3. Berno Buechel & Tim Hellmann & Stefan Kölßner, 2014. "Opinion Dynamics and Wisdom under Conformity," Working Papers 2014.51, Fondazione Eni Enrico Mattei.
  4. Mikhail Golosov & Vasiliki Skreta & Aleh Tsyvinski & Andrea Wilson, 2011. "Dynamic Strategic Information Transmission," Working Papers 11-17, New York University, Leonard N. Stern School of Business, Department of Economics.
  5. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2008. "A “Super” Folk Theorem for dynastic repeated games," Economic Theory, Springer, vol. 37(3), pages 357-394, December.

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