Journal Article

Communication and Learning

Luca Anderlini, Dino Gerardi and Roger Lagunoff

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 79, issue 2, pages 419-450
Published in print April 2012 | ISSN: 0034-6527
Published online November 2011 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rdr031
Communication and Learning

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  • Information, Knowledge, and Uncertainy
  • Game Theory and Bargaining Theory

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We study strategic information transmission in an organization consisting of an infinite sequence of individual decision-makers. Each decision-maker chooses an action and receives an informative but imperfect signal of the once-and-for-all realization of an unobserved state. The state affects all individuals' preferences over present and future decisions. Decision-makers do not directly observe the realized signals or actions of their predecessors. Instead, they must rely on cheap-talk messages in order to accumulate information about the state. Each decision-maker is therefore both a receiver of information with respect to his decision and a sender with respect to all future decisions. We show that if preferences are not perfectly aligned, “full learning” equilibria—ones in which the individuals' posterior beliefs eventually place full weight on the true state—do not exist. This is so both in the case of private communication, in which each individual only hears the message of his immediate predecessor, and in the case of public communication, in which a decision-maker hears the message of all his predecessors. Surprisingly, in the latter case full learning may be impossible even in the limit as all members of the organization become perfectly patient. We also consider the case where all individuals have access to a mediator who can work across time periods arbitrarily far apart. In this case, full learning equilibria exist.

Keywords: Communication; Learning; Dynamic strategic information transmission; C70; C72; C73; D80; D83

Journal Article.  18612 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Game Theory and Bargaining Theory

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