Coordination with flexible information acquisition

Ming Yang

Journal of Economic Theory, 2015, vol. 158, issue PB, 721-738

Abstract: We study flexible information acquisition in a coordination game. “Flexible” acquisition means that players choose not only how much but also what kind of information to acquire. Information acquisition has a cost proportional to reduction of entropy. Hence, players will collect the information most relevant to their welfare but can be rationally inattentive to other aspects of the fundamental. When information is cheap, this flexibility enables players to acquire information that makes efficient coordination possible, which also leads to multiple equilibria. This result contrasts with the global game literature, where information structure is less flexible and cheap information leads to a unique equilibrium with inefficient coordination.

Keywords: Coordination game; Flexible information acquisition; Rational inattention (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (54)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:158:y:2015:i:pb:p:721-738

DOI: 10.1016/j.jet.2014.11.017

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