Information Sharing Networks in Linear Quadratic Games

33 Pages Posted: 6 Jun 2013

See all articles by Sergio Currarini

Sergio Currarini

University of Leicester - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Francesco Feri

University of London

Date Written: June 5, 2013

Abstract

We study the bilateral exchange of information in the context of linear quadratic games. An information structure is here represented by a non directed network, whose nodes are agents and whose links represent sharing agreements. We first study the equilibrium use of information in any given sharing network, finding that the extent to which a piece of information is "public" affects the equilibrium use of it, in line with previous results in the literature. We then study the incentives to share information ex-ante, highlighting the role of the elasticity of payoffs to the equilibrium volatility of one's own strategy and of one's opponents' strategies. For the case of uncorrelated signals we fully characterize pairwise stable networks for the general linear quadratic game. For the case of correlated signals, we study pair-wise stable networks for three specific linear quadratic games - Cournot oligopoly, Keynes’ beauty contest and Public good provision - in which strategies are substitute, complement and orthogonal, respectively. We show that signals’ correlation favors the transmission of information, but may also prevent all information from being transmitted.

Keywords: Information Sharing, Networks, Bayesian Equilibrium, Beauty Contest, Oligopoly

JEL Classification: D43, D82, D85, L13

Suggested Citation

Currarini, Sergio and Feri, Francesco, Information Sharing Networks in Linear Quadratic Games (June 5, 2013). FEEM Working Paper No. 47.2013; CMCC Research Paper No. 0172. Available at SSRN: https://ssrn.com/abstract=2274723 or http://dx.doi.org/10.2139/ssrn.2274723

Sergio Currarini (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Francesco Feri

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

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