Knowing What Others Know: Coordination Motives in Information Acquisition

Laura Veldkamp and Christian Hellwig

No 6506, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We explore how optimal information choices change the predictions of strategic models. When a large number of agents play a game with strategic complementarity, information choices exhibit complementarity as well: If an agent wants to do what others do, they want to know what others know. This makes heterogeneous beliefs difficult to sustain and may generate multiple equilibria. In models with substitutability, agents prefer to differentiate their information choices. We use these theoretical results to determine the role of information choice in recent price-setting models and to propose modeling techniques that ensure equilibrium uniqueness.

Keywords: Costly information acquisition; Price-setting; Strategic complementarities (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 E31 (search for similar items in EconPapers)
Date: 2007-10
New Economics Papers: this item is included in nep-gth and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Knowing What Others Know: Coordination Motives in Information Acquisition (2009)
Working Paper: Knowing what others Know: Coordination motives in information acquisition (2006)
Working Paper: Knowing What Others Know: Coordination Motives in Information Acquisition (2006)
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