When are Signals Complements or Substitutes?
AbstractThe paper introduces a notion of complementarity (substitutability) of two signals which requires that in all decision problems each signal becomes more (less) valuable when the other signal becomes available. We provide a general characterization which relates com- plementarity and substitutability to a Blackwell comparison of two auxiliary signals. In a setting with a binary state space and binary signals, we find an explicit characteriza- tion that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to more general settings.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29124.
Date of creation: Aug 2010
Date of revision:
Information; signals; complementarity; substitutability.;
Other versions of this item:
- Börgers, Tilman & Hernando-Veciana, Ángel & Krähmer, Daniel, . "When are signals complements or substitutes?," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/679, Universidad Carlos III de Madrid.
- Tilman Borgers & Angel Hernanco-Veciana & Daniel Krohmer, 2010. "When are Signals Complements or Substitutes," Discussion Papers 1488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Tilman Borgers & Angel Hernando-Veciana & Daniel Krahmer, 2007. "When are signals complements or substitutes?," Economics Working Papers we072111, Universidad Carlos III, Departamento de Economía.
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
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