Endogenous Information Acquisition in Coordination Games

David Myatt and Chris Wallace

No 445, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: 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.

Keywords: Coordination games; Information acquisition; Publicity; Beauty-contest games (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Date: 2009-08-01
New Economics Papers: this item is included in nep-cta, nep-gth and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Journal Article: Endogenous Information Acquisition in Coordination Games (2012)
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