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Information aggregation with costly reporting

Author

Listed:
  • Martin J. Osborne
  • Jeffrey S. Rosenthal
  • Colin Stewart

Abstract

A group of individuals with common interests has to choose a binary option whose desirability depends on an unknown binary state of the world. The individuals independently and privately observe a signal of the state. Each individual chooses whether to reveal her signal, at a cost. We show that if for all revelation choices of the individuals the option chosen by the group is optimal given the signals revealed and the set of individuals who do not reveal signals, then in a large group few signals are revealed, and these signals are extreme. The correct decision is taken with high probability in one state but with probability bounded away from one in the other. No anonymous decision-making mechanism without transfers does better. However, the first-best average payoff can be attained using transfers among agents, and approximately attained with a non-anonymous mechanism without transfers.

Suggested Citation

  • Martin J. Osborne & Jeffrey S. Rosenthal & Colin Stewart, 2016. "Information aggregation with costly reporting," Working Papers tecipa-565, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-565
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    Cited by:

    1. Kaiwei Zhang & Xi Weng & Xienan Cheng, 2022. "Optimal Pricing Schemes in the Presence of Social Learning and Costly Reporting," Papers 2211.07362, arXiv.org, revised Dec 2023.
    2. Conde-Ruiz, J. Ignacio & Ganuza, Juan José & Profeta, Paola, 2022. "Statistical discrimination and committees," European Economic Review, Elsevier, vol. 141(C).

    More about this item

    Keywords

    Information aggregation; costly reporting; collective decision-making;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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