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Bayesian Comparative Statics

Author

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  • Leal Vizcaíno René
  • Mekonnen Teddy

Abstract

We study how information affects equilibria and welfare in games. For an agent, more precise information about an unknown state of the world leads to a mean-preserving spread of beliefs. We provide necessary and sufficient conditions to obtain either a non-increasing mean or a non-decreasing-mean spread of actions whenever information precision increases for at least one agent. We apply our Bayesian comparative statics framework to study informational externalities in strategic environments. In persuasion games, we derive sufficient conditions that lead to extremal disclosure of information. In oligopolistic markets, we characterize the incentives of firms to share information. In macroeconomic models, we show that information not only drives the amplitude of business cycles but also affects aggregate output.

Suggested Citation

  • Leal Vizcaíno René & Mekonnen Teddy, 2019. "Bayesian Comparative Statics," Working Papers 2019-03, Banco de México.
  • Handle: RePEc:bdm:wpaper:2019-03
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Comparative Statics; Information Acquisition; Information Orders; Persuasion; Value of Information; Supermodular Games;

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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