When are signals complements or substitutes?
The paper introduces a notion of complementarity (substitutability) of two signals which requires that in all decision problems each signal becomes more (less) valuable when the other signal becomes available. We provide a general characterization which relates complementarity and substitutability to a Blackwell-comparison of two auxiliary signals. In a special setting with a binary state space and binary, symmetric signals, we find an explicit characterization that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to the general case. Finally, we study implications of complementarity and substitutability for information acquisition and in a second price auction.
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32716, University Library of Munich, Germany.
- Timothy Feddersen & Wolfgang Pesendorfer, 1994.
"Voting Behavior and Information Aggregation in Elections with Private Information,"
1117, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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"The Value of Information in Monotone Decision Problems,"
01003, Stanford University, Department of Economics.
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- Paul Milgrom & Robert J. Weber, 1981.
"The Value of Information in a Sealed-Bid Auction,"
462, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Miklos Sarvary & Philip M. Parker, 1997. "Marketing Information: A Competitive Analysis," Marketing Science, INFORMS, vol. 16(1), pages 24-38.
- Péter Kondor, 2005.
"The more we know, the less we agree: public announcements and higher-order expectations,"
FMG Discussion Papers
dp532, Financial Markets Group.
- Peter Kondor, 2004. "The more we know, the less we agree: public announcements and higher-order expectations," LSE Research Online Documents on Economics 24645, London School of Economics and Political Science, LSE Library.
- Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 165-191, 01.
- Dow, James & Gorton, Gary, 1993. "Trading, Communication and the Response of Asset Prices to News," Economic Journal, Royal Economic Society, vol. 103(418), pages 639-46, May.
- Nicola Persico, 1997.
"Information Acquisition in Auctions,"
UCLA Economics Working Papers
762, UCLA Department of Economics.
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