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Dynamic Strategic Information Transmission

Listed author(s):
  • Mikhail Golosov

    (Yale University and NES)

  • Vasiliki Skreta

    (New York University, Stern School of Business)

  • Aleh Tsyvinski

    (Yale University and NES)

  • Andrea Wilson

    (New York University)

This paper studies strategic information transmission in a dynamic environment where, each period, a privately informed expert sends a message and a decision maker takes an action. Our main result is that, in contrast to a static environment, full information revelation is possible. The gradual revelation of information and the eventual full revelation is supported by the dynamic rewards and punishments. The construction of a fully revealing equilibrium relies on two key features. The first feature is that the expert is incentivized, via appropriate actions, to join separable groups in which she initially pools with far-away types, then later reveals her type. The second feature is the use of trigger strategies. The decision maker is incentivized by the reward of further information revelation if he chooses the separation-inducing actions, and the threat of a stop in information release if he does not. Our equilibrium is non-monotonic. With monotonic partition equilibria, full revelation is impossible.

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Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 1110.

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Length: 48 pages
Date of creation: 2011
Date of revision: May 2011
Handle: RePEc:eie:wpaper:1110
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