Coordination Incentives for Information Acquisition with a Finite Set of Players

Antonio Jimenez-Martinez

No DTE 497, Working Papers from CIDE, División de Economía

Abstract: We consider a class of two-player quadratic games under incomplete information to study the relation between exogenous coordination motives and strategic interactions in information acquisition. The players make decisions in two stages. They decide about information acquisition in the first stage and choose their actions in the second stage. Preferences are such that the optimal action of each player depends on the state of the world and on the action taken by the other player. We show that if the degree of coordination in actions is sufficiently high, then the strategic interaction in the information choice does not have the same coordination motives as the action choice. Consequently, heterogeneous beliefs can be sustained endogenously for our class of games if the degree of complementarity or substitutability is high enough. Our results contrast qualitatively with the case studied by Hellwig and Veldkamp (2009) where the set of players is a continuum

Keywords: Incomplete information; information acquisition; coordination (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2011-02
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