Endogenous information acquisition in coordination games

Working paper

In the context of a "beauty contest" coordination game (in which pay-offs depend on the proximity of actions to an unobserved state variable and to the average action) players choose how much costly attention to pay to various informative signals; they endogenously select information sources and how carefully to listen to them. Each signal has an underlying accuracy (how precisely it identifies the state variable) and a clarity (how easy it is for players to understand what the signal says). The unique information-acquisition equilibrium has interesting properties: only a subset of signals are assigned positive weight and attention; these are the clearest signals available, even if such signals have poor underlying accuracy; the size of the subset shrinks as the complementarity of players' actions becomes more acute; and, if actions are more complementary, the information endogenously acquired in equilibrium is more public in nature.

Authors: Myatt, D; Wallace, C

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2009-08-01
• Paper number: 445
• Keywords: beauty-contest games; publicity; coordination games; information acquisition