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The Relative Contributions of Private Information Sharing and Public Information Releases to Information Aggregation

Author Info

  • Darrell DUFFIE

    (Graduate School of Business, Stanford University and NBER)

  • Semyon MALAMUD

    (EPF Lausanne and Swiss Finance Institute)

  • Gustavo MANSO

    (Sloan School of Business, MIT)

Abstract

We calculate learning rates when agents are informed through both public and private observation of other agents’ actions. We provide an explicit solution for the evolution of the distribution of posterior beliefs. When the private learning channel is present, we show that convergence of the distribution of beliefs to the perfect-information limit is exponential at a rate equal to the sum of the mean arrival rate of public information and the mean rate at which individual agents are randomly matched with other agents. If, however, there is no private information sharing, then convergence is exponential at a rate strictly lower than the mean arrival rate of public information.

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Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 09-33.

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Length: 39 pages
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Handle: RePEc:chf:rpseri:rp0933
Contact details of provider: Web page: http://www.SwissFinanceInstitute.ch
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Keywords: information percolation; search; learning rates.;

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Find related papers by JEL classification:
  • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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  1. Banerjee, Abhijit & Fudenberg, Drew, 2004. "Word-of-mouth learning," Games and Economic Behavior, Elsevier, vol. 46(1), pages 1-22, January.
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  8. Weill, Pierre-Olivier, 2008. "Liquidity premia in dynamic bargaining markets," Journal of Economic Theory, Elsevier, vol. 140(1), pages 66-96, May.
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  12. Darrell DUFFIE & Semyon MALAMUD & Gustavo MANSO, . "Information Percolation with Equilibrium Search Dynamics," Swiss Finance Institute Research Paper Series 09-02, Swiss Finance Institute.
  13. Blouin, Max R & Serrano, Roberto, 2001. "A Decentralized Market with Common Values Uncertainty: Non-Steady States," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 323-46, April.
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  18. Giuseppe Moscarini & Lones Smith, 2002. "The Law of Large Demand for Information," Econometrica, Econometric Society, vol. 70(6), pages 2351-2366, November.
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  23. Amador, Manuel & Weill, Pierre-Olivier, 2006. "Learning from Private and Public Observation of Other's Actions," MPRA Paper 109, University Library of Munich, Germany.
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Cited by:

  1. Manela, Asaf, 2014. "The value of diffusing information," Journal of Financial Economics, Elsevier, vol. 111(1), pages 181-199.
  2. Amador, Manuel & Weill, Pierre-Olivier, 2012. "Learning from private and public observations of othersʼ actions," Journal of Economic Theory, Elsevier, vol. 147(3), pages 910-940.
  3. Darrell DUFFIE & Semyon MALAMUD & Gustavo MANSO, 2010. "Information Percolation in Segmented Markets," Swiss Finance Institute Research Paper Series 10-09, Swiss Finance Institute.
  4. Moscarini, Giuseppe & Wright, Randall, 2010. "Introduction to Search Theory and Applications," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1319-1324, July.
  5. Yang Lu & Wing Suen & Heng Chen, 2013. "The Power of Whispers: A Theory of Rumor, Communication and Revolution," 2013 Meeting Papers 411, Society for Economic Dynamics.
  6. Mikhail Golosov & Aleh Tsyvinski & Guido Lorenzoni, 2008. "Decentralized trading with private information," 2008 Meeting Papers 391, Society for Economic Dynamics.

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