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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 proximity of actions to an unobserved state variable and to the average action) players choose how much costly attention to pay to various informative signals; they endogenously select information sources and how carefully to listen to them.� Each signal has an underlying accuracy (how precisely it identifies the state variable) and a clarity (how easy it is for players to understand what the signal says).� The unique information-acquisition equilibrium has interesting properties: only a subset of signals are assigned positive weight and attention; these are the clearest signals available, even if such signals have poor underlying accuracy; the size of the subset shrinks as the complementarity of players' actions becomes more acute; and, if actions are more complementary, the information endogenously acquired in equilibrium is more public in nature.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 445.

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Date of creation: 01 Aug 2009
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Handle: RePEc:oxf:wpaper:445

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Keywords: Coordination games; Information acquisition; Publicity; Beauty-contest games;

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References

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  1. 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.
  2. Laura Veldkamp & Christian Hellwig, 2006. "Knowing What Others Know: Coordination Motives in Information Acquisition," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 06-14, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. 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.
  4. George-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 91-98, May.
  5. Stephen Morris & Jeffery D. Amato & Hyun Song Shin, 2004. "Communication and Monetary Policy," Yale School of Management Working Papers, Yale School of Management ysm345, Yale School of Management.
  6. David P. Myatt & Torun Dewan, 2007. "The Qualities of Leadership: Direction, Communication, and Obfuscation," Economics Series Working Papers 311, University of Oxford, Department of Economics.
  7. 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.
  8. 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.
  9. 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.
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Citations

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Cited by:
  1. Margaret Meyer & Bruno Strulovici, 2013. "The Supermodular Stochastic Ordering," Economics Series Working Papers 655, University of Oxford, Department of Economics.
  2. Ryan A Chahrour, 2011. "Transparency and Costly Information Acquisition," 2011 Meeting Papers 1221, Society for Economic Dynamics.
  3. 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.
  4. 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.
  5. Toni Ahnert & Ali Kakhbod, 2014. "Information, Amplification and Financial Crisis," Working Papers, Bank of Canada 14-30, Bank of Canada.
  6. Antonella Tutino & Anton Cheremukhin, 2012. "Asymmetric Firm Dynamics under Rational Inattention," 2012 Meeting Papers, Society for Economic Dynamics 161, Society for Economic Dynamics.
  7. 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.
  8. repec:hal:wpaper:halshs-00652279 is not listed on IDEAS
  9. Ryan Chahrour, 2014. "Public Communication and Information Acquisition," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 73-101, July.
  10. 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.
  11. Jeanne Hagenbach & Frédéric Koessler, 2011. "Full Disclosure in Decentralized Organizations," PSE Working Papers halshs-00652279, HAL.
  12. 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.
  13. repec:hal:wpaper:hal-00753473 is not listed on IDEAS
  14. 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.
  15. Kyriazis, Nicholas & Metaxas, Theodore, 2013. "The emergence of democracy: a behavioural perspective," MPRA Paper 47146, University Library of Munich, Germany.

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