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Information revelation through bunching

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  • Wang, Tao

Abstract

In this paper, we analyze a dynamic game of pure information externality. Each player receives a private signal and chooses whether and when to invest. Bunching occurs when a subgroup of the players make decisions contingent on their signals, while the rest of the players wait regardless of their signals. We focus on asymmetric pure strategy equilibria, where players' private information is revealed gradually through bunching. When players become patient enough, the most efficient equilibrium contains no herding of investing, while the least efficient equilibrium resembles the outcomes in an exogenous timing model. When players' discount factors differ, less patient players will bunch earlier than more patient players.

Suggested Citation

  • Wang, Tao, 2017. "Information revelation through bunching," Games and Economic Behavior, Elsevier, vol. 102(C), pages 568-582.
  • Handle: RePEc:eee:gamebe:v:102:y:2017:i:c:p:568-582
    DOI: 10.1016/j.geb.2017.02.017
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    References listed on IDEAS

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    More about this item

    Keywords

    Bunching; Herding; Endogenous timing; Asymmetric equilibrium; Information externality;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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