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Brownian Signals: Information Quality, Quantity and Timing in Repeated Games

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  • Osório, António (António Miguel)

Abstract

This paper examines different Brownian information structures over varying time intervals. We focus on the non-limit case, and on the trade-offs between information quality and quantity when making a decision whether to cooperate or defect in a prisoners' dilemma game. In the best-case scenario, the information quality gains are strong enough so that agents can substitute information quantity with information quality. In the second best-case scenario, the information quality gains are weak and must be compensated for with additional information quantity. In this case, information quality improves but not quickly enough to dispense with the use of information quantity. For suficiently large time intervals, information degrades and monitoring becomes mostly based on information quantity. The results depend crucially on the particular information structure and on the rate at which information quality improves or decays with respect to the discounting incentives. JEL: C73, D82, D86. KEYWORDS: Repeated Games; Frequent Monitoring; Information Quantity; In- formation Quality.

Suggested Citation

  • Osório, António (António Miguel), 2017. "Brownian Signals: Information Quality, Quantity and Timing in Repeated Games," Working Papers 2072/290761, Universitat Rovira i Virgili, Department of Economics.
  • Handle: RePEc:urv:wpaper:2072/290761
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    References listed on IDEAS

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    1. Yuliy Sannikov & Andrzej Skrzypacz, 2007. "Impossibility of Collusion under Imperfect Monitoring with Flexible Production," American Economic Review, American Economic Association, vol. 97(5), pages 1794-1823, December.
    2. Drew Fudenberg & David K. Levine, 2008. "Continuous time limits of repeated games with imperfect public monitoring," World Scientific Book Chapters,in: A Long-Run Collaboration On Long-Run Games, chapter 17, pages 369-388 World Scientific Publishing Co. Pte. Ltd..
    3. Michihiro Kandori, 1992. "The Use of Information in Repeated Games with Imperfect Monitoring," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 581-593.
    4. Kamada, Yuichiro & Kominers, Scott Duke, 2010. "Information can wreck cooperation: A counterpoint to Kandori (1992)," Economics Letters, Elsevier, vol. 107(2), pages 112-114, May.
    5. Yuliy Sannikov, 2007. "Games with Imperfectly Observable Actions in Continuous Time," Econometrica, Econometric Society, vol. 75(5), pages 1285-1329, September.
    6. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
    7. Osório, António (António Miguel), 2015. "Some Notes and Comments on the Efficient use of Information in Repeated Games with Poisson Signals," Working Papers 2072/249233, Universitat Rovira i Virgili, Department of Economics.
    8. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
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    More about this item

    Keywords

    Jocs; Teoria de; Informació; Teoria de la; 33 - Economia;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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