Information sharing networks in linear quadratic games

Francesco Feri, Sergio Currarini

Research output: Contribution to journalArticlepeer-review

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 given the network, finding that the extent to which a piece of information is observed by others 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 opponents’ strategies. For the case of uncorrelated signals we fully characterise 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 a Public Good Game—in which strategies are substitute, complement and orthogonal, respectively. We show that signals’ correlation favours the transmission of information, but may also prevent all information from being transmitted.
Original languageEnglish
Pages (from-to)701-732
Number of pages32
JournalInternational Journal of Game Theory
Volume44
Issue number3
DOIs
Publication statusPublished - 1 Aug 2015

Keywords

  • Bayesian equilibrium
  • Beauty Contest
  • Information sharing
  • Networks
  • Oligopoly

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