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Rational exaggeration in information aggregation games

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  • Rausser, Gordon C.

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

  • Simon, Leo K.

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

  • Zhao, Jinhua

Abstract

This paper studies a class of information aggregation models which we call “aggregation games.†It departs from the related literature in two main respects: information is aggregated by averaging rather than majority rule, and each player selects from a continuum of reports rather than making a binary choice. Each member of a group receives a private signal, then submits a report to the center, who makes a decision based on the average of these reports. The essence of an aggregation game is that heterogeneous players engage in a “tug-of-war,†as they attempt to manipulate the center’s decision process by mis-reporting their private information. When players have distinct biases, almost of them rationally exaggerate the extent of these biases. The degree of exaggeration increases with the number of players: if the game is sufficiently large, then almost all players exaggerate to the maximum admissible extent, regardless of their individual signals. In the limit, the connection between players’ private information and the outcome of the game is obliterated.

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Bibliographic Info

Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1067.

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Length: 46 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:are:cudare:1067

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Related research

Keywords: information theory; econometrics; econometric models;

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References

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  1. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections With Private Information," Levine's Working Paper Archive 1560, David K. Levine.
  2. Vijay Krishna & John Morgan, 2001. "A Model Of Expertise," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 747-775, May.
  3. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
  4. John Morgan & Phillip C. Stocken, 2008. "Information Aggregation in Polls," American Economic Review, American Economic Association, vol. 98(3), pages 864-96, June.
  5. Gerling, Kerstin & Gruner, Hans Peter & Kiel, Alexandra & Schulte, Elisabeth, 2005. "Information acquisition and decision making in committees: A survey," European Journal of Political Economy, Elsevier, vol. 21(3), pages 563-597, September.
  6. Athey, S., 1997. "Sigle Crossing Properties and the Existence of Pure Strategy Equilibria in Games of Incomplete Information," Working papers 97-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Ronny Razin, 2003. "Signaling and Election Motivations in a Voting Model with Common Values and Responsive Candidates," Econometrica, Econometric Society, vol. 71(4), pages 1083-1119, 07.
  8. Gruner, Hans Peter & Kiel, Alexandra, 2004. "Collective decisions with interdependent valuations," European Economic Review, Elsevier, vol. 48(5), pages 1147-1168, October.
  9. Piketty, Thomas, 1999. "The information-aggregation approach to political institutions," European Economic Review, Elsevier, vol. 43(4-6), pages 791-800, April.
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