Strategically Valuable Information

16 Pages Posted: 26 Jan 2016

See all articles by Josh Cherry

Josh Cherry

University of Michigan at Ann Arbor - Department of Economics

Lones Smith

University of Wisconsin at Madison - Department of Economics

Date Written: October 2012

Abstract

We extend the comparison of experiments in Blackwell (1953) to a strategic setting that both simplifies and expands upon ideas in Gossner (2000). We introduce a partial order on correlating signals, called more strategically informative, and prove that it is equivalent to the partial order more strategically valuable — namely, inducing more Bayesian Nash equilibrium payoff vectors. Our conditions are tractable, affording proof of the existence and uniqueness of the maximally informative correlating signal. They are also amenable to applications. For instance, we provide a partial ordering on sunspot equilibria that applies for all environments. In our centerpiece application to repeated games with private monitoring, we show that a more strategically informative monitoring structure weakly expands the set of sequential equilibria. This mirrors an early result of Kandori (1992) for repeated games with imperfect public monitoring.

Keywords: Correlated Equilibrium, Blackwell's Theorem, Value of Information

JEL Classification: C7, D8

Suggested Citation

Cherry, Josh and Smith, Lones, Strategically Valuable Information (October 2012). Available at SSRN: https://ssrn.com/abstract=2722234 or http://dx.doi.org/10.2139/ssrn.2722234

Josh Cherry

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Lones Smith (Contact Author)

University of Wisconsin at Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706-1393
United States
608-263-3871 (Phone)
608-262-2033 (Fax)

HOME PAGE: http://www.lonessmith.com

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