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.
References listed on IDEAS
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LSE Research Online Documents on Economics
24645, London School of Economics and Political Science, LSE Library.
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- Schmitz, Patrick W. & Tröger, Thomas, 2012. "The (sub-)optimality of the majority rule," Games and Economic Behavior, Elsevier, vol. 74(2), pages 651-665.
- Schmitz, Patrick W. & Tröger, Thomas, 2011. "The (sub-)optimality of the majority rule," MPRA Paper 32716, University Library of Munich, Germany.
- James Andreoni & Tymofiy Mylovanov, 2012. "Diverging Opinions," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 209-232, February.
- Milgrom, Paul & Weber, Robert J., 1982. "The value of information in a sealed-bid auction," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 105-114, June.
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- Miklos Sarvary & Philip M. Parker, 1997. "Marketing Information: A Competitive Analysis," Marketing Science, INFORMS, vol. 16(1), pages 24-38.
- Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 165-191. Full references (including those not matched with items on IDEAS)
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