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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"Voting Behavior and Information Aggregation in Elections with Private Information,"
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"The value of information in a sealed-bid auction,"
Journal of Mathematical Economics,
Elsevier, vol. 10(1), pages 105-114, June.
- Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 165-191.
- Susan Athey & Jonathan Levin, 1998.
"The Value of Information In Monotone Decision Problems,"
98-24, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jonathan Levin & Susan Athey, 2001. "The Value of Information in Monotone Decision Problems," Working Papers 01003, Stanford University, Department of Economics.
- Nicola Persico, 1997.
"Information Acquisition in Auctions,"
UCLA Economics Working Papers
762, UCLA Department of Economics.
- Miklos Sarvary & Philip M. Parker, 1997. "Marketing Information: A Competitive Analysis," Marketing Science, INFORMS, vol. 16(1), pages 24-38.
- 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.
- Péter Kondor, 2005. "The more we know, the less we agree: public announcements and higher-order expectations," FMG Discussion Papers dp532, Financial Markets Group.
- 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.
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