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Endogenous information acquisition in Bayesian games with strategic complementarities

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  • Amir, Rabah
  • Lazzati, Natalia

Abstract

This paper studies covert (or hidden) information acquisition in common value Bayesian games of strategic complementarities. Using the supermodular stochastic order to arrange the structures of information increasingly in terms of preferences, we provide novel, easily interpretable and verifiable, though restrictive conditions under which the value of information is increasing and convex, and study the implications in terms of the equilibrium configuration. Increasing marginal returns to information leads to extreme behavior in that agents opt either for the highest or the lowest quality signal, so that the final analysis of this complex game simplifies greatly into that of a two-action game. This result can rationalize the complete information game as an endogenous outcome. Finally, we also establish that higher-quality information leads players to select more dispersed actions in the Bayesian game.

Suggested Citation

  • Amir, Rabah & Lazzati, Natalia, 2016. "Endogenous information acquisition in Bayesian games with strategic complementarities," Journal of Economic Theory, Elsevier, vol. 163(C), pages 684-698.
  • Handle: RePEc:eee:jetheo:v:163:y:2016:i:c:p:684-698
    DOI: 10.1016/j.jet.2016.03.005
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    References listed on IDEAS

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    Cited by:

    1. Anne-Christine Barthel & Tarun Sabarwal, 2018. "Directional monotone comparative statics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(3), pages 557-591, October.
    2. Finn Christensen, 2019. "Comparative statics and heterogeneity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(3), pages 665-702, April.
    3. Sinclair-Desgagné, Bernard, 2019. "Prior knowledge and monotone decision problems," Economics Letters, Elsevier, vol. 175(C), pages 15-18.
    4. Leal Vizcaíno René & Mekonnen Teddy, 2019. "Bayesian Comparative Statics," Working Papers 2019-03, Banco de México.
    5. Rabah Amir, 2019. "Supermodularity and Complementarity in Economic Theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(3), pages 487-496, April.
    6. Antonio Jiménez-Martínez, 2019. "Discrimination through versioning with advertising in social networks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(3), pages 525-564, April.

    More about this item

    Keywords

    Information acquisition; Supermodular Bayesian games; Stochastic supermodular order; Costly rationality;

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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