Information Percolation with Equilibrium Search Dynamics

Details Information Percolation with Equilibrium Search Dynamics Information Percolation with Equilibrium Search Dynamics

2008-11-18

arxiv.org/abs/0811.3023v1

Mathematics

Probability

Scientific paper

We solve for the equilibrium dynamics of information sharing in a large population. Each agent is endowed with signals regarding the likely outcome of a random variable of common concern. Individuals choose the effort with which they search for others from whom they can gather additional information. When two agents meet, they share their information. The information gathered is further shared at subsequent meetings, and so on. Equilibria exist in which agents search maximally until they acquire sufficient information precision, and then minimally. A tax whose proceeds are used to subsidize the costs of search improves information sharing and can in some cases increase welfare. On the other hand, endowing agents with public signals reduces information sharing and can in some cases decrease welfare.

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