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Bayesian Comparative Statics

Leal Vizcaíno René and Mekonnen Teddy

No 2019-03, Working Papers from Banco de México

Abstract: We study how information affects equilibria and welfare in games. For an agent, more precise information about an unknown state of the world leads to a mean-preserving spread of beliefs. We provide necessary and sufficient conditions to obtain either a non-increasing mean or a non-decreasing-mean spread of actions whenever information precision increases for at least one agent. We apply our Bayesian comparative statics framework to study informational externalities in strategic environments. In persuasion games, we derive sufficient conditions that lead to extremal disclosure of information. In oligopolistic markets, we characterize the incentives of firms to share information. In macroeconomic models, we show that information not only drives the amplitude of business cycles but also affects aggregate output.

Keywords: Comparative Statics; Information Acquisition; Information Orders; Persuasion; Value of Information; Supermodular Games (search for similar items in EconPapers)
JEL-codes: C44 C61 D42 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-ict and nep-mic
Date: 2019-03
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