Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities

20 Pages Posted: 8 Jan 2014

See all articles by Camille Cornand

Camille Cornand

University of Lyon II; University of Angers - Institute of Economic Theory and Analysis (GATE)

Frank Heinemann

Berlin Institute of Technology; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: January 7, 2014

Abstract

In games with strategic complementarities, public information about the state of the world has a larger impact on equilibrium actions than private information of the same precision, because public signals are more informative about the likely behavior of others. We present an experiment in which agents’ optimal actions are a weighted average of the fundamental state and their expectations of other agents’ actions. We measure the responses to public and private signals. We find that, on average, subjects put a larger weight on the public signal. In line with theoretical predictions, as the relative weight of the coordination component in a player’s utility increases, players put more weight on the public signal when making their choices. However, the weight is smaller than in equilibrium, which indicates that subjects underestimate the information contained in public signals about other players’ beliefs.

Keywords: coordination games, strategic uncertainty, private information, public information

JEL Classification: C92, D82, D84

Suggested Citation

Cornand, Camille and Heinemann, Frank, Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities (January 7, 2014). Available at SSRN: https://ssrn.com/abstract=2375750 or http://dx.doi.org/10.2139/ssrn.2375750

Camille Cornand (Contact Author)

University of Lyon II ( email )

93 Chemin des Mouilles
69676 Bron Cedex
France

University of Angers - Institute of Economic Theory and Analysis (GATE) ( email )

93 chemin des Mouilles
Monnaie et Finance at Lyon
69130 Ecully cedex
France

Frank Heinemann

Berlin Institute of Technology ( email )

Strasse des 17. Juni 135
H 52
Berlin, 10623
Germany

HOME PAGE: http://www.macroeconomics.tu-berlin.de/Heinemann.html

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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