1. 2 Strategic Information Transmission A sender observes the true state t in y[0, 1] t is uniformly distributed The sender reports r to the receiver.

Slides:

Advertisements

Similar presentations

Comparative Cheap Talk Archishman Chakraborty and Rick Harbaugh JET, forthcoming.

Advertisements

UTILITY MAXIMIZATION AND CHOICE

Chapter 5 Appendix Indifference Curves

Signaling Game Problems. Signaling game. Two players– a sender and receiver. Sender knows his type. Receiver does not. It is not necessarily in the sender’s.

Private Information and Auctions

Stackelberg -leader/follower game 2 firms choose quantities sequentially (1) chooses its output; then (2) chooses it output; then the market clears This.

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc., 1999 Managerial Economics & Business Strategy Chapter.

Multi-item auctions with identical items limited supply: M items (M smaller than number of bidders, n). Three possible bidder types: –Unit-demand bidders.

1 . 2 Uncertainty Dixit: Optimization in Economic Theory (Chapter 9)

Frank Cowell: Microeconomics Market Power and Misrepresentation MICROECONOMICS Principles and Analysis Frank Cowell September 2006.

1. problem set 14 from Osborne’s Introd. To G.T. p.332 Ex

1. problem set 13 see last slide Last Slide 3 Extensive form Games with Incomplete Information 111 Information set of player 1 Belief p1p1 p2p2 p3p3.

Adverse Selection Asymmetric information is feature of many markets

1 Industrial Organization Product Differentiation Univ. Prof. dr. Maarten Janssen University of Vienna Summer semester Week 12.

McGraw-Hill/Irwin Copyright  2006 by The McGraw-Hill Companies, Inc. All rights reserved. INDIFFERENCE CURVE ANALYSIS INDIFFERENCE CURVE ANALYSIS Chapter.

Harsanyi transformation Players have private information Each possibility is called a type. Nature chooses a type for each player. Probability distribution.

Economics of Management Strategy BEE3027 Lecture 3 15/02/2008.

Chapter 9 THE ECONOMICS OF INFORMATION Copyright ©2002 by South-Western, a division of Thomson Learning. All rights reserved. MICROECONOMIC THEORY BASIC.

Recent developments in the economics of information: The role of intermediaries Maarten C.W. Janssen University of Vienna.

Chapter 3: Consumer Behavior 1 of 37 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Microeconomics Pindyck/Rubinfeld, 8e. MARGINAL.

Recent developments in the economics of information Maarten C.W. Janssen University of Vienna.

Chapter Seven Revealed Preference. Revealed Preference Analysis u Suppose we observe the demands (consumption choices) that a consumer makes for different.

TOPIC 6 REPEATED GAMES The same players play the same game G period after period. Before playing in one period they perfectly observe the actions chosen.

Changes in Income An increase in income will cause the budget constraint out in a parallel manner An increase in income will cause the budget constraint.

Lecture 4: Models of Price Competition

EC941 - Game Theory Francesco Squintani Lecture 3 1.

© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e. Fernando & Yvonn Quijano Prepared by: Chapter 9 Consumer.

1 Economics & Evolution. 2 Cournot Game 2 players Each chooses quantity q i ≥ 0 Player i’s payoff is: q i (1- q i –q j ) Inverse demand (price) No cost.

Economics Winter 14 February 12 th, 2014 Lecture 14 Ch. 8 Consumer’s Choice Concept of Utility The Theory of Demand.

Practice Questions. __b__The adverse selection process is prevalent in the used car market because: a.only poorer people are likely to purchase used cars.

Common Knowledge: The Math. We need a way to talk about “private information”

3.1. Strategic Behavior Matilde Machado.

“The Price System As A Mechanism For Using Knowledge”

Module 12: Indifference Curves and Budget Constraints

Nash equilibrium Nash equilibrium is defined in terms of strategies, not payoffs Every player is best responding simultaneously (everyone optimizes) This.

Microeconomics Course E John Hey. Examinations Go to Read.

© 2010 Institute of Information Management National Chiao Tung University Chapter 2 Compatibility and Standards The Network Externality Approach The Supporting.

Industrial Organization- Matilde Machado The Hotelling Model Hotelling Model Matilde Machado.

Extensive Games with Imperfect Information

Objectives:  Use the utility-maximizing model to explain how consumers choose goods and services.  Use the concept of utility to explain how the law.

Chapter ElevenCopyright 2009 Pearson Education, Inc. Publishing as Prentice Hall. 1 Chapter 11 Game Theory and Asymmetric Information.

Decision theory under uncertainty

CHAPTER 31 PRODUCTION. The Robinson Crusoe Economy One consumer and one firm; The consumer owns the firm; Preference: over leisure and coconuts; Technology:

Lecture 8 Product differentiation. Standard models thus far assume that every firm is producing a homogenous good; that is, the product sold by In the.

McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Indifference Curve Analysis Chapter 8 Appendix.

1 Chapter 4 UTILITY MAXIMIZATION AND CHOICE Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

Auctions serve the dual purpose of eliciting preferences and allocating resources between competing uses. A less fundamental but more practical reason.

© 2010 Institute of Information Management National Chiao Tung University Chapter 9 Markets for Differentiated Product Market for Two Differentiated Products.

6.853: Topics in Algorithmic Game Theory Fall 2011 Constantinos Daskalakis Lecture 22.

Auctions serve the dual purpose of eliciting preferences and allocating resources between competing uses. A less fundamental but more practical reason.

Intermediate Microeconomics Game Theory. So far we have only studied situations that were not “strategic”. The optimal behavior of any given individual.

EC941 - Game Theory Prof. Francesco Squintani Lecture 6 1.

Critique of Hotelling Hotelling’s “Principle of Minimum Differentiation” was flawed No pure strategy exists if firms are close together. With quadratic.

Microeconomics Corso E John Hey. Summary of Chapter 8 The contract curve shows the allocations that are efficient in the sense of Pareto. There always.

Microeconomics Course E John Hey. Examinations Go to Read.

Cheap Talk. When can cheap talk be believed? We have discussed costly signaling models like educational signaling. In these models, a signal of one’s.

© 2006 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien—1 st ed. c h a p t e r nine Prepared by: Fernando & Yvonn.

Q 2.1 Nash Equilibrium Ben

Signaling unobservable quality choice through price and advertising: The case with competing firms Speaker: Wu Fulan 3rd August,2009.

Information Design: A unified Perspective

Information Design: A unified Perspective

Strategic Information Transmission

Strategic Information Transmission

Partly Verifiable Signals (c.n.)

Strategic Information Transmission

Horizontal Differentiation

Strategic Information Transmission

Comparative Cheap Talk

Chapter 6A Practice Quiz Tutorial Indifference Curve Analysis

Presentation transcript:

1

2 Strategic Information Transmission A sender observes the true state t in y[0, 1] t is uniformly distributed The sender reports r to the receiver The receiver takes an action y

3 Is truth-telling an equilibrium? If sender sends the true signal r(t) = t then the receiver should believe that the state is t, when r = t. he will choose y = t the sender will get the payoff: -[t – (t +b)] 2 = -b 2 < 0 But he could report t + b, the receiver will play y = t + b and the sender will get the payoff: -[t + b – (t +b)] 2 = 0 So, is not an equilibrium

4 Similarly, if the sender sends a signal r(t), a monotonic function The receiver should believe t when he seen r(t) And the sender would be better off sending the signal r(t + b) So, this cannot be an equilibrium

5 No Information ?? The sender sends a constant signal r(t) = c The receiver must believe `uniform distribution’. As initially. After another report, assume the receiver believes the same. His optimal action is y = 1/2 The sender’s report does not influence the action. This is an equilibrium !! Next

6

7 No Information ?? But for small values of b and some values of t both would be better off if the action was t+b + + > 0 Inefficient equilibrium

8 Partial Information ( K messages) When the receiver hears he must believe `uniform’ over The sender: In interval must prefer signal At must be indifferent between signals

9 If at t, the sender is indifferent between the two actions A,B, then:

10 Check that it is an equilibrium, i.e. that the sender wants to send these signals)

11 The highest K (for a given b ): b

12 Conspicuous Expenditure as a signal of Quality auffällig A firm is of High or Low quality (costs c H,0 ) It may spend E conspicuously (sponsoring something) A consumer observes the price p and the expenditure E When he buys a products he learns its quality (utility H,0 ) The firm sets a new price and the consumer may buy a second unit.

13 N H L f f c buy n.b. f buy n.b. c buy n.b. f buy n.b. c c

14 An Equilibrium Firm H: Firm L: Consumer believes H only iff (p,E) staisfies Otherwise he believes L Consumer buys product in first period only if And in second period only if he knows it is H, or if the price is 0

15 N H L f f c buy n.b. f buy n.b. c buy n.b. f buy n.b. c c

16

17 end