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Information Percolation with Equilibrium Search Dynamics

Darrell Duffie, Semyon Malamud () and Gustavo Manso
Additional contact information
Gustavo Manso: MIT

No 09-02, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We solve for the equilibrium dynamics of information sharing in a large population. Each agent is endowed with signals regarding the likely outcome of a random variable of common concern. Individuals choose the effort with which they search for others from whom they can gather additional information. When two agents meet, they share their information. The information gathered is further shared at subsequent meetings, and so on. Equilibria exist in which agents search maximally until they acquire sufficient information precision, and then minimally. A tax whose proceeds are used to subsidize the costs of search improves information sharing and can in some cases increase welfare. On the other hand,endowing agents with public signals reduces information sharing and can in some cases decrease welfare.

Keywords: search; matching; equilibrium; information; percolation (search for similar items in EconPapers)
JEL-codes: C78 C73 C62 (search for similar items in EconPapers)
Date: 2009-01
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Journal Article: Information Percolation With Equilibrium Search Dynamics (2009) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp0902

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