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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 perfectly 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. Copyright 2012, Oxford University Press.

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000001868.

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Date of creation: 08 Feb 2008
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Handle: RePEc:cla:levrem:122247000000001868
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  1. Mikhail Golosov & Vasiliki Skreta & Aleh Tsyvinski & Andrea Wilson, 2011. "Dynamic Strategic Information Transmission," Cowles Foundation Discussion Papers 1802, Cowles Foundation for Research in Economics, Yale University, revised Jun 2011.
  2. Ottaviani, Marco & Sorensen, Peter Norman, 2006. "Professional advice," Journal of Economic Theory, Elsevier, vol. 126(1), pages 120-142, January.
  3. Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
  4. Forges, F., 1984. "An approach to communication equilibria," CORE Discussion Papers 1984035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  6. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
  7. Smith, L, 1996. "Social Learning in a Changing World," Working papers 96-34, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Roger Lagunoff, 2002. "Credible communication in dynastic government," Economics Bulletin, AccessEcon, vol. 28(4), pages A0.
  9. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  10. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, July.
  11. Luca Anderlini & Roger Lagunoff, 2000. "Communication in Dynastic Repeated Games: 'Whitewashes' and 'Coverups'," Working Papers gueconwpa~01-01-03, Georgetown University, Department of Economics, revised 01 Jul 2001.
  12. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  13. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July.
  14. Roger Lagunoff & Akihiko Matsui, 2001. "Organizations and Overlapping Generations Games: Memory, Communication, and Altruism," Game Theory and Information 0103002, EconWPA.
  15. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  16. Hajime Kobayashi, 2007. "Folk Theorems For Infinitely Repeated Games Played By Organizations With Short-Lived Members," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 517-549, 05.
  17. Gale, Douglas, 1996. "What have we learned from social learning?," European Economic Review, Elsevier, vol. 40(3-5), pages 617-628, April.
  18. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2007. "Social Memory and Evidence from the Past," Cowles Foundation Discussion Papers 1601, Cowles Foundation for Research in Economics, Yale University.
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