When are signals complements or substitutes?

Tilman Börgers (), Angel Hernando-Veciana () and Daniel Krähmer

Journal of Economic Theory, 2013, vol. 148, issue 1, 165-195

Abstract: The paper introduces a notion of complementarity (substitutability) of two signals which requires that in all decision problems each signal becomes more (less) valuable when the other signal becomes available. We provide a general characterization which relates complementarity and substitutability to a Blackwell comparison of two auxiliary signals. In a setting with a binary state space and binary signals, we find an explicit characterization that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to more general settings. We also illustrate the implications of our concepts for three economic applications: information disclosure in auctions, information aggregation through voting, and polarization of beliefs.

Keywords: Complementarity; Substitutability; Value of information; Blackwell ordering (search for similar items in EconPapers)
JEL-codes: C00 C44 D81 D83 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Working Paper: When are Signals Complements or Substitutes (2010)
Working Paper: When are Signals Complements or Substitutes? (2010)
Working Paper: When are signals complements or substitutes? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:148:y:2013:i:1:p:165-195

DOI: 10.1016/j.jet.2012.12.012

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