Information sharing networks in linear quadratic games

Abstract

We study the bilateral exchange of information in the context of linear quadratic games. An information structure is here represented by a non directed network, whose nodes are agents and whose links represent sharing agreements. We first study the equilibrium use of information in any given sharing network, finding that the extent to which a piece of information is "public" affects the equilibrium use of it, in line with previous results in the literature. We then study the incentives to share information ex-ante, highlighting the role of the elasticity of payoffs to the equilibrium volatility of one's own strategy and of one's opponents' strategies. For the case of uncorrelated signals we fully characterize pairwise stable networks for the general linear quadratic game. For the case of correlated signals, we study pairwise stable networks for three specific linear quadratic games -Cournot oligopoly, Keynes' beauty contest and Public good provision -in which strategies are substitute, complement and orthogonal, respectively. We show that signals' correlation favors the transmission of information, but may also prevent all information form being transmitted.

On the Formation of Producers’ Information‐Sharing Coalitions

“…Intuitively, the benefit of coalition membership is insufficient for the producers to relinquish their monopoly rent on the private information. The result echoes the empty network in Raith (1996), and Currarini and Feri (2015). Since the equilibrium is unique and maximizes the aggregate payoff, our results suggest a robust and global prediction.…”

“…A general framework is proposed by Raith (1996), in which those earlier results are summarized. More recently, Currarini and Feri (2015) and Lee (2014) analyze models similar to ours. Due to exogenous information provision and symmetry assumption in their models, an empty network is the unique equilibrium outcome by allowing multi-player deviation.…”

Inclusive cognitive hierarchy

“…For the sake of tractability, we focus on linear quadratic games (Currarini and Feri (2015)) which have desirable features for our analysis. First, they are fully aggregative games (Cornes and Hartley (2012)), in which the payoff of each player is affected by the action profile of the players through the aggregate of the strategies of all players and her own strategy.…”

Information Use and Acquisition In Price‐Setting Oligopolies

“…In a world with public (perfectly correlated) and private (conditionally uncorrelated) signals about the fundamental, actions react more strongly to public information: such information is more important for higher-order beliefs. Frameworks like this have been applied extensively: to investment games, to business cycles, to large oligopoly games, to monopolistically competitive suppliers, to political leadership, to financial markets, and to networked communication Pavan, 2004, 2007;Hellwig, 2005;Myatt, 2008, 2012;Allen et al, 2006;de Mart ı, 2007, 2009;Calv o-Armengol et al, 2015;Currarini and Feri, 2015;Fainmesser and Galeotti, 2016).…”