Endogenous private information structures

Abstract

We formally incorporate the option to gather information into a game and thus endogenize the information structure. We ask whether models with exogenous information structures are robust with respect to this endogenization. Any Nash equilibrium of the game with information acquisition induces a Nash equilibrium in the corresponding game with an exogenous structure. We provide sufficient conditions on the structure of the game for which this remains true when 'Nash' is replaced by 'sequential'. We characterize the (sequential) Nash equilibria of games with exogenous information structures that can arise as a (sequential) Nash equilibrium of games with endogenous information acquisition.Journal of Economic Literature Classification Numbers: C72, D82, D83.

How Much Would You Pay to Change a Game before Playing It?

“…Finally, our work is also related to previous work on endogenous information structures in games [ 10 , 15 ]. That literature focuses on classifying which information structures can arise endogenously when players can pay to acquire information.…”

“…Broadly speaking, our work is related to—and partly synthesizes—three branches of the current literature: comparative statics in games [ 1 , 4 ], value of information in games [ 9 ], and endogenous information structures [ 10 ].…”

“…In addition, Ref. [ 10 ] compare the case where a player’s decision to acquire more information is observed with the case of an unobserved decision. This kind of comparison is a central part of our analysis below.…”

Do people make strategic commitments? Experimental evidence on strategic information avoidance

“…Many important interactive economic situations involve decisions about how much information to collect. Some examples are negotiators engaging in fact finding missions before sitting down at the negotiating table, and bidders going to viewing days to get a feel for the value of the items on sale (see Hauk andHurkens 2001, andVulkan 2006). It is useful when considering such situations to know the extent to which players make the theoretically predicted strategic commitment since deviations from the prediction could have sizeable economic implications for the players.…”

“…1 Well-known examples of strategic commitments are moving before someone else to get a first-mover advantage (Bagwell 1995;Müller 2000, andSchelling 1960); signing contracts with third-parties (Aghion andBolton 1987, andBensaid andGary-Bobo 1993); burning money (Ben-Porath and Dekel 1992;Van Damme 1989;Huck and Müller 2005); strategic delegation (Fershtman and Gneezy 2001;Kalai 1997, andSchelling 1960); changing the information structure (Hauk and Hurkens 2001;Vulkan 2006, andSchelling 1960) or controlling the flow of information (Brocas and Carrillo 2007).…”