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Communication and Learning

  • Luca Anderlini
  • Dino Gerardi
  • Roger Lagunoff

We study strategic information transmission in an organization consisting of an infinite sequence of individual decision makers. Each decision maker chooses an action and receives an informative but imperfect signal of the once-and-for-all realization of an unobserved state. The state affects all individuals' preferences over present and future decisions. Decision makers do not directly observe the realized signals or actions of their predecessors. Instead, they must rely on cheap-talk messages in order to accumulate information about the state. Each decision maker is therefore both a receiver of information with respect to his decision, and a sender with respect to all future decisions. We show that if preferences are not perfectly aligned "full learning" equilibria - ones in which the individuals' posterior beliefs eventually place full weight on the true state - do not exist. This is so both in the case of private communication, in which each individual only hears the message of his immediate predecessor, and in the case of public communication, in which a decision maker hears the message of all his predecessors. Surprisingly, in the latter case full learning may be impossible even in the limit as all members of the organization become infinitely patient. We also consider the case where all individuals have access to a mediator who can work across time periods arbitrarily far apart. In this case full learning equilibria exist.

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Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 82.

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Length: 50 pages
Date of creation: 2008
Date of revision: 2010
Handle: RePEc:cca:wpaper:82
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  1. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2007. "Social Memory and Evidence from the Past," Levine's Bibliography 321307000000000850, UCLA Department of Economics.
  2. Mikhail Golosov, 2009. "Dynamic Strategic Information Transmission," 2009 Meeting Papers 181, Society for Economic Dynamics.
  3. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  4. Giuseppe Moscarin & Marco Ottaviani & Lones Smith, . "Social Learning in a Changing World," ELSE working papers 010, ESRC Centre on Economics Learning and Social Evolution.
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  10. Lagunoff, Roger, 2006. "Credible communication in dynastic government," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 59-86, January.
  11. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
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  13. Vijay Krishna & John Morgan, 2001. "A Model of Expertise," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 747-775.
  14. Roger Lagunoff & Akihiko Matsui, 2001. "Organizations and Overlapping Generations Games: Memory, Communication, and Altruism," Working Papers 1, Georgetown University, Department of Economics.
  15. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, July.
  16. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
  17. Gale, Douglas, 1996. "What have we learned from social learning?," European Economic Review, Elsevier, vol. 40(3-5), pages 617-628, April.
  18. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
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