Journal Article

Knowing What Others Know: Coordination Motives in Information Acquisition

Christian Hellwig and Laura Veldkamp

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 76, issue 1, pages 223-251
Published in print January 2009 | ISSN: 0034-6527
Published online January 2009 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2008.00515.x
Knowing What Others Know: Coordination Motives in Information Acquisition

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  • Information, Knowledge, and Uncertainy
  • Mathematical Methods; Programming Methods; Mathematical and Simulation Modelling

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We explore how optimal information choices change the predictions of strategic models. When a large number of agents play a game with strategic complementarity, information choices exhibit complementarity as well: if an agent wants to do what others do, they want to know what others know. This makes heterogeneous beliefs difficult to sustain and may generate multiple equilibria. In models with substitutability, agents prefer to differentiate their information choices. We use these theoretical results to examine the role of information choice in recent price-setting models and to propose modelling techniques that ensure equilibrium uniqueness.

Keywords: C62; D83

Journal Article.  13008 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Mathematical Methods; Programming Methods; Mathematical and Simulation Modelling

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