Searching for Information
38 Pages Posted: 2 Feb 2015 Last revised: 9 Feb 2018
Date Written: July 8, 2017
This paper provides a search-based information acquisition framework using an urn model with an asymptotic approach. The underlying intuition of the model is simple: when the scope of information search is more limited, marginal search efforts produce less useful information due to redundancy, but commonality of information among different agents increases. Consequently, limited information searchability induces a trade-off between an information source's precision and its commonality. In a "beauty contest" game with endogenous information acquisition, this precision-commonality trade-off generates non-fundamental volatility through the channel of information acquisition.
Keywords: information acquisition, information search, commonality of information, urn model, coordination games
JEL Classification: C65, D80, D81, D83
Suggested Citation: Suggested Citation