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Knowing What Others Know: Coordination Motives in Information Acquisition

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  • Laura Veldkamp
  • Christian Hellwig

Abstract

We explore how optimal information choices change the predictions of strategic models. When a large number of agents play a game with strategic complementarity, information choices exhibit complementarity as well: If an agent wants to do what others do, they want to know what others know. This makes heterogeneous beliefs difficult to sustain and may generate multiple equilibria. In models with substitutability, agents prefer to differentiate their information choices. We use these theoretical results to determine the role of information choice in recent price-setting models and to propose modeling techniques that ensure equilibrium uniqueness.

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File URL: http://pages.stern.nyu.edu/~lveldkam/pdfs/InfoCoord.pdf
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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 06-14.

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Date of creation: 2006
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Handle: RePEc:ste:nystbu:06-14

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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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