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Information Divergence and Endogenous Evolution of Asymmetric Information

Author

Listed:
  • Ratna K. Shrestha

    (University of British Columbia)

  • Gaurav Subedi

    (RALP Technologies)

  • Ayush Shrestha

    (Global Relay Communications Inc)

Abstract

Standard theories trace information asymmetry to privately held information, heterogeneous signals, or costly information acquisition. We identify a distinct mechanism: otherwise identical rational agents observing a common Markov state at asynchronous times can hold different predictive distributions because their information differs in age. When the transition kernel separates information ages, independent Bernoulli observation arrivals make such divergence recur infinitely often almost surely, even with identical arrival probabilities. When agents instead choose costly updating intensities, independent update realizations can regenerate heterogeneous information ages among ex ante identical agents. In a stationary Gaussian AR(1) environment, the consequences depend on common staleness as well as the age gap: holding the gap fixed, older information raises individual uncertainty while reducing expected squared forecast disagreement and the value of certifying relative freshness. This generates stale consensus: low disagreement despite high uncertainty. With multiple ordered ages, costly certification supports partial-unraveling equilibria in which fresher types certify and sufficiently stale types pool. Under geometric information ages, more frequent updating weakly lowers the smallest and largest equilibrium disclosure cutoffs wherever positive-certification equilibria exist. The framework has implications for credit, insurance, financial markets, and multi-agent AI.

Suggested Citation

  • Ratna K. Shrestha & Gaurav Subedi & Ayush Shrestha, 2026. "Information Divergence and Endogenous Evolution of Asymmetric Information," Papers 2610.11200, arXiv.org.
  • Handle: RePEc:arx:papers:2610.11200
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    References listed on IDEAS

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