Effects of Asymmetric Payoffs and Information Cost in Sequential Information Revelation Games

Young-Ro Yoon ()
Additional contact information
Young-Ro Yoon: Indiana University Bloomington

No 2007-010, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: This paper explores the effects of costly information and asymmetry in reward and penalty on an agent's strategic behavior in acquiring and revealing information. Whether information is costly to acquire or not, in order to induce truthfulness in an agent's action, the penalty should not be stressed more than the reward to avoid herding or imitation. When the reward is greater than the penalty, if information is not costly, for the relatively low quality of information, the agent exhibits anti-herding. However, an equilibrium -- in which she acts truthfully for all parameters of information quality -- can be induced by managing the reward and penalty. If information is costly, within certain parameter sets of information quality, the agent exhibits deviation and imitation. Also, for the moderate quality of information, the agent acquires her information although it is costly and reveals it truthfully. The derived results can provide the reasoning behind agents' behavior trends in information revelation according to reputation and the difficulty of a given task.

Keywords: Asymmetry in reward and penalty; Information Cost; Truthfulness in information revelation; Herding; Anti-Herding; Imitation; Deviation (search for similar items in EconPapers)
JEL-codes: D81 D82 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2007-06
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://caepr.indiana.edu/RePEc/inu/caeprp/caepr2007-010.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inu:caeprp:2007010

Access Statistics for this paper

More papers in CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington Contact information at EDIRC.
Bibliographic data for series maintained by Center for Applied Economics and Policy Research ().