Belief-Free Rationalizability and Informational Robustness

Dirk Bergemann, Tibor Heumann and Stephen Morris
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Tibor Heumann: Dept. of Economics, Yale University, https://economics.yale.edu/

No 2088, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study a linear interaction model with asymmetric information. We first characterize the linear Bayes Nash equilibrium for a class of one dimensional signals. It is then shown that this class of one dimensional signals provide a comprehensive description of the first and second moments of the distribution of outcomes for any Bayes Nash equilibrium and any information structure. We use our results in a variety of applications: (i) we study the connections between incomplete information and strategic interaction, (ii) we explain to what extent payoff environment and information structure of a economy are distinguishable through the equilibrium outcomes of the economy, and (iii) we analyze how equilibrium outcomes can be decomposed to understand the sources of individual and aggregate volatility.

Keywords: Networks; Incomplete Information; Bayes Correlated Equilibrium; Volatility; Moments Restrictions; Linear Best Responses; Quadratic Payoffs (search for similar items in EconPapers)
JEL-codes: C72 C73 D43 D83 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-05
New Economics Papers: this item is included in nep-dcm, nep-gth, nep-mic and nep-ore
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Belief-free rationalizability and informational robustness (2017)
Working Paper: Belief-Free Rationalizability and Informational Robustness (2016)
Working Paper: Belief-Free Rationalizability and Informational Robustness (2016)
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