Endogenous Information Acquisition in Coordination Games.
In the context of a “beauty contest” coordination game (in which pay-offs depend on the proximity of actions to an unobserved state variable and to the average action) players choose how much costly attention to pay to various informative signals; they endogenously select information sources and how...
| Main Authors: | , |
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| Format: | Working paper |
| Language: | English |
| Published: |
Department of Economics (University of Oxford)
2009
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| Summary: | In the context of a “beauty contest” coordination game (in which pay-offs depend on the proximity of actions to an unobserved state variable and to the average action) players choose how much costly attention to pay to various informative signals; they endogenously select information sources and how carefully to listen to them. Each signal has an underlying accuracy (how precisely it identifies the state variable) and a clarity (how easy it is for players to understand what the signal says). The unique information-acquisition equilibrium has interesting properties: only a subset of signals are assigned positive weight and attention; these are the clearest signals available, even if such signals have poor underlying accuracy; the size of the subset shrinks as the complementarity of players’ actions becomes more acute; and, if actions are more complementary, the information endogenously acquired in equilibrium is more public in nature. |
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