Information aggregation with costly reporting

Martin Osborne, Jeffrey Rosenthal and Colin Stewart

Working Papers from University of Toronto, Department of Economics

Abstract: A group of individuals with common interests has to choose a binary option whose desirability depends on an unknown binary state of the world. The individuals independently and privately observe a signal of the state. Each individual chooses whether to reveal her signal, at a cost. We show that if for all revelation choices of the individuals the option chosen by the group is optimal given the signals revealed and the set of individuals who do not reveal signals, then in a large group few signals are revealed, and these signals are extreme. The correct decision is taken with high probability in one state but with probability bounded away from one in the other. No anonymous decision-making mechanism without transfers does better. However, the first-best average payoff can be attained using transfers among agents, and approximately attained with a non-anonymous mechanism without transfers.

Keywords: Information aggregation; costly reporting; collective decision-making (search for similar items in EconPapers)
JEL-codes: D70 D81 D82 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2016-10-05
New Economics Papers: this item is included in nep-mic
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Related works:
Journal Article: Information Aggregation with Costly Reporting (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-565

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