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When are Signals Complements or Substitutes?

  • Börgers, Tilman
  • Hernando-Veciana, Angel
  • Krähmer, Daniel

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 com- plementarity and substitutability to a Blackwell comparison of two auxiliary signals. In a setting with a binary state space and binary signals, we find an explicit characteriza- tion that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to more general settings.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29124.

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Date of creation: Aug 2010
Date of revision:
Handle: RePEc:pra:mprapa:29124
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  1. Timothy Feddersen & Wolfgang Pesendorfer, 1994. "Voting Behavior and Information Aggregation in Elections with Private Information," Discussion Papers 1117, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 165-191.
  3. Jonathan Levin & Susan Athey, 2001. "The Value of Information in Monotone Decision Problems," Working Papers 01003, Stanford University, Department of Economics.
  4. 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.
  5. Nicola Persico, 2000. "Information Acquisition in Auctions," Econometrica, Econometric Society, vol. 68(1), pages 135-148, January.
  6. 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.
  7. Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 165-191, 01.
  8. Miklos Sarvary & Philip M. Parker, 1997. "Marketing Information: A Competitive Analysis," Marketing Science, INFORMS, vol. 16(1), pages 24-38.
  9. Schmitz, Patrick W. & Tröger, Thomas, 2011. "The (sub-)optimality of the majority rule," MPRA Paper 32716, University Library of Munich, Germany.
  10. James Andreoni & Tymofiy Mylovanov, 2012. "Diverging Opinions," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 209-32, February.
  11. 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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