Flexible Information Acquisition in Large Coordination Games
(2018) In Working Papers- Abstract
- This paper studies how large populations of rationally inattentive individuals acquire information about economic fundamentals when, along with the motive to accurately estimate the fundamental, they have coordination motives. Information acquisition is costly but flexible: players determine the distribution of the signal that they receive and arbitrarily correlate it with the fundamental, paying costs linear in Shannon mutual information. Without assuming a normal prior for the fundamental, the class of equilibria in continuous strategies is characterized. Populations with heterogeneous costs exhibit the same aggregate behavior as homogeneous populations with the same average cost. Equilibria where the population-wide average action is an... (More)
- This paper studies how large populations of rationally inattentive individuals acquire information about economic fundamentals when, along with the motive to accurately estimate the fundamental, they have coordination motives. Information acquisition is costly but flexible: players determine the distribution of the signal that they receive and arbitrarily correlate it with the fundamental, paying costs linear in Shannon mutual information. Without assuming a normal prior for the fundamental, the class of equilibria in continuous strategies is characterized. Populations with heterogeneous costs exhibit the same aggregate behavior as homogeneous populations with the same average cost. Equilibria where the population-wide average action is an affine function of the fundamental exist only when the fundamental is normally distributed. Finally, a novel method allows to study non-normal priors, leading to new insights. For example, the distribution of the equilibrium action exhibits an amplified skewness compared to the distribution of the fundamental. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/01e76a0f-d026-47b1-9da5-7a71df61d81f
- author
- Rigos, Alexandros LU
- organization
- publishing date
- 2018
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- Coordination games, Beauty-contest, Flexible information acquisition, Rational inattention, Non-normal prior, Skew normal distribution, C72, D83
- in
- Working Papers
- issue
- 2018:30
- pages
- 50 pages
- language
- English
- LU publication?
- yes
- id
- 01e76a0f-d026-47b1-9da5-7a71df61d81f
- alternative location
- https://swopec.hhs.se/lunewp/abs/lunewp2018_030.htm
- date added to LUP
- 2018-11-12 12:33:07
- date last changed
- 2019-08-16 09:11:53
@misc{01e76a0f-d026-47b1-9da5-7a71df61d81f,
abstract = {{This paper studies how large populations of rationally inattentive individuals acquire information about economic fundamentals when, along with the motive to accurately estimate the fundamental, they have coordination motives. Information acquisition is costly but flexible: players determine the distribution of the signal that they receive and arbitrarily correlate it with the fundamental, paying costs linear in Shannon mutual information. Without assuming a normal prior for the fundamental, the class of equilibria in continuous strategies is characterized. Populations with heterogeneous costs exhibit the same aggregate behavior as homogeneous populations with the same average cost. Equilibria where the population-wide average action is an affine function of the fundamental exist only when the fundamental is normally distributed. Finally, a novel method allows to study non-normal priors, leading to new insights. For example, the distribution of the equilibrium action exhibits an amplified skewness compared to the distribution of the fundamental.}},
author = {{Rigos, Alexandros}},
keywords = {{Coordination games; Beauty-contest; Flexible information acquisition; Rational inattention; Non-normal prior; Skew normal distribution; C72; D83}},
language = {{eng}},
note = {{Working Paper}},
number = {{2018:30}},
series = {{Working Papers}},
title = {{Flexible Information Acquisition in Large Coordination Games}},
url = {{https://swopec.hhs.se/lunewp/abs/lunewp2018_030.htm}},
year = {{2018}},
}