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Belief-Free Rationalizability and Informational Robustness

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We study a linear interaction model with asymmetric information. We first characterize the linear Bayes Nash equilibrium for a class of one dimensional signals. It is then shown that this class of one dimensional signals provide a comprehensive description of the first and second moments of the distribution of outcomes for any Bayes Nash equilibrium and any information structure. We use our results in a variety of applications: (i) we study the connections between incomplete information and strategic interaction, (ii) we explain to what extent payoff environment and information structure of a economy are distinguishable through the equilibrium outcomes of the economy, and (iii) we analyze how equilibrium outcomes can be decomposed to understand the sources of individual and aggregate volatility.

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File URL: http://cowles.yale.edu/sites/default/files/files/pub/d20/d2088.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 2088.

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Length: 50 pages
Date of creation: May 2017
Handle: RePEc:cwl:cwldpp:2088
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Yale University, Box 208281, New Haven, CT 06520-8281 USA

Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.yale.edu/

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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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