Coordination and the Relative Cost of Distinguishing Nearby States

Stephen Morris and Ming Yang
Additional contact information
Ming Yang: Duke University

Working Papers from Princeton University, Department of Economics, Econometric Research Program.

Abstract: We study a coordination game where players simultaneously acquire information prior to the play of the game. We allow general information acquisition technologies, modeled by a cost functional mapping from information structures. Costly local distinguishability is a property requiring that the cost of distinguishing nearby states is hard relative to distinguishing distant states. This property is not important in decision problems, but is crucial in determining equilibrium outcomes in games. If it holds, there is a unique equilibrium; if it fails, there are multiple equilibria close to those that would exist if there was complete information. We study these issues in the context of a regime change game with a continuum of players. We also provide a common belief foundation for equilibria of this game. This allows us to distinguish cases where the players could (physically) acquire information giving rise to multiple equilibria, but choose not to, and situations where players could not physically have acquired information in a way consistent with multiple equilibria. Our analysis corresponds to the former case, while the choosing precision of additive noise corresponds to the latter case.

Keywords: coordination; endogenous information acquisition; costly local distinguishability; higher order beliefs (search for similar items in EconPapers)
JEL-codes: C72 D82 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://detc.princeton.edu/wp-content/uploads/2016/ ... ng-Nearby-States.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://detc.princeton.edu/wp-content/uploads/2016/11/wp79_2016-revised_Morris_Yang_Coordination-and-the-Relative-Cost-of-Distinguishing-Nearby-States.pdf [302 Found]--> https://detc.princeton.edu/wp-content/uploads/2016/11/wp79_2016-revised_Morris_Yang_Coordination-and-the-Relative-Cost-of-Distinguishing-Nearby-States.pdf [301 Moved Permanently]--> https://economics.princeton.edu/the-william-s-dietrich-ii-economic-theory-center/wp-content/uploads/2016/11/wp79_2016-revised_Morris_Yang_Coordination-and-the-Relative-Cost-of-Distinguishing-Nearby-States.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:pri:metric:079_2016

Access Statistics for this paper

More papers in Working Papers from Princeton University, Department of Economics, Econometric Research Program. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().