Characterizing Social Value of Information
AbstractThis paper examines the social value of information in symmetric Bayesian games with quadratic payoff functions and normally distributed public and private signals. The main results identify necessary and sufficient conditions for welfare to increase with public or private information. Using the conditions, we classify games into eight types by welfare effects of information. In the first type, welfare necessarily increases with both public and private information. In the second type, welfare can decrease, but only with public information. In the third type, welfare can decrease as well as increase with both public and private information. In the fourth type, welfare can decrease with both, but can increase only with private information. The remaining four types are the counterparts of the above four types with the opposite welfare effects of information. For each type, we characterize a socially optimal information structure and a socially optimal Bayesian correlated equilibrium.
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Bibliographic InfoPaper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2013-01.
Length: 41 p.
Date of creation: Mar 2013
Date of revision:
Bayesian game; incomplete information; optimal information structure; potential game; private signal; public signal; team; value of information;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-06 (All new papers)
- NEP-CTA-2013-04-06 (Contract Theory & Applications)
- NEP-GTH-2013-04-06 (Game Theory)
- NEP-MIC-2013-04-06 (Microeconomics)
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