Knowing What Others Know: Coordination Motives in Information Acquisition

38 Pages Posted: 19 Oct 2006

See all articles by Christian Hellwig

Christian Hellwig

University of Toulouse 1 - Toulouse School of Economics (TSE)

Laura Veldkamp

New York University - Stern School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: March 22, 2007

Abstract

We explore how optimal information choices change the predictions of strategic models. When a large number of agents play a game with strategic complementarity, information choices exhibit complementarity as well: If an agent wants to do what others do, they want to know what others know. This makes heterogeneous beliefs difficult to sustain and may generate multiple equilibria. In models with substitutability, agents prefer to differentiate their information choices. We use these theoretical results to examine the role of information choice in recent price-setting models and to propose modeling techniques that ensure equilibrium uniqueness.

Keywords: Coordination games, information choice, beauty contest game, price-setting

JEL Classification: D83, C72, E3

Suggested Citation

Hellwig, Christian and Veldkamp, Laura, Knowing What Others Know: Coordination Motives in Information Acquisition (March 22, 2007). Available at SSRN: https://ssrn.com/abstract=938516 or http://dx.doi.org/10.2139/ssrn.938516

Christian Hellwig

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Laura Veldkamp (Contact Author)

New York University - Stern School of Business ( email )

44 West 4th St. - Suite 7-180
New York, NY 100012
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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