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Coordination with flexible information acquisition

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  • Yang, Ming

Abstract

We study flexible information acquisition in a coordination game. “Flexible” acquisition means that players choose not only how much but also what kind of information to acquire. Information acquisition has a cost proportional to reduction of entropy. Hence, players will collect the information most relevant to their welfare but can be rationally inattentive to other aspects of the fundamental. When information is cheap, this flexibility enables players to acquire information that makes efficient coordination possible, which also leads to multiple equilibria. This result contrasts with the global game literature, where information structure is less flexible and cheap information leads to a unique equilibrium with inefficient coordination.

Suggested Citation

  • Yang, Ming, 2015. "Coordination with flexible information acquisition," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 721-738.
  • Handle: RePEc:eee:jetheo:v:158:y:2015:i:pb:p:721-738
    DOI: 10.1016/j.jet.2014.11.017
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Weijie Zhong, 2018. "Indirect information measure and dynamic learning," Papers 1809.00697, arXiv.org.
    2. Matějka, Filip, 2015. "Rigid pricing and rationally inattentive consumer," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 656-678.
    3. Bilancini, Ennio & Boncinelli, Leonardo, 2018. "Signaling with costly acquisition of signals," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 141-150.
    4. repec:eee:macchp:v2-1065 is not listed on IDEAS
    5. Szkup, Michal & Trevino, Isabel, 2015. "Information acquisition in global games of regime change," Journal of Economic Theory, Elsevier, vol. 160(C), pages 387-428.
    6. Pavan, Alessandro & Vives, Xavier, 2015. "Information, Coordination, and Market Frictions: An Introduction," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 407-426.
    7. Lindbeck, Assar & Weibull, Jörgen, 2017. "Investment, Rational Inattention, and Delegation," Working Paper Series 1171, Research Institute of Industrial Economics.
    8. Pathikrit Basu & Kalyan Chatterjee & Tetsuya Hoshino & Omer Tamuz, 2018. "Repeated Coordination with Private Learning," Papers 1809.00051, arXiv.org.
    9. Benjamin Hébert & Michael Woodford, 2017. "Rational Inattention and Sequential Information Sampling," NBER Working Papers 23787, National Bureau of Economic Research, Inc.
    10. repec:eee:jaecon:v:63:y:2017:i:2:p:499-512 is not listed on IDEAS

    More about this item

    Keywords

    Coordination game; Flexible information acquisition; Rational inattention;

    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

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