Searching for Information

38 Pages Posted: 2 Feb 2015 Last revised: 9 Feb 2018

See all articles by Jungsuk Han

Jungsuk Han

Seoul National University - College of Business Administration; Swedish House of Finance

Francesco Sangiorgi

Frankfurt School of Finance & Management

Date Written: July 8, 2017

Abstract

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

Han, Jungsuk and Sangiorgi, Francesco, Searching for Information (July 8, 2017). Journal of Economic Theory, Vol. 175, pp. 342-373, 2018, Available at SSRN: https://ssrn.com/abstract=2558560 or http://dx.doi.org/10.2139/ssrn.2558560

Jungsuk Han (Contact Author)

Seoul National University - College of Business Administration ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Francesco Sangiorgi

Frankfurt School of Finance & Management ( email )

Adickesallee 34
Frankfurt am Main, 60322
Germany

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