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Bayesian Comparative Statics

Mekonnen, Teddy and Leal Vizcaíno, René (2016) Bayesian Comparative Statics. . (Unpublished)

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We study how information affects equilibria and welfare in games. For an agent, more precise information about an unknown state of the world leads to a mean-preserving spread of beliefs. We provide necessary and sufficient conditions to obtain either a non-increasing-mean or a non-decreasing-mean spread of actions whenever information precision increases for at least one agent. We apply our Bayesian comparative statics framework to study informational externalities in strategic environments. In persuasion games, we derive sufficient conditions that lead to extremal disclosure of information. In oligopolistic markets, we characterize the incentives of firms to share information. In macroeconomic models, we show that information not only drives the amplitude of business cycles but also affects aggregate output. Finally, in a novel application, we compare the demand for information in covert and overt information acquisition games.

Item Type:Report or Paper (Working Paper)
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URLURL TypeDescription Paper
Additional Information:This paper was previously circulated under the title, "Ex-ante Comparative Statics: Responsiveness to Information Quality." We are indebted to Asher Wolinsky, Eddie Dekel, Bruno Strulovici, and Jeff Ely for their unwavering guidance and encouragement. Our work has also greatly benefited from conversations with Laura Doval, Jay Lu, Alessandro Pavan, Rob Porter, Phil Reny, Marciano Siniscalchi, Jean Tirole, and Zenon Zabinski.
Subject Keywords:Comparative Statics, Information Sharing, Bayesian Persuasion, Information Acquisition
Classification Code:JEL Classification: C44, C61, D42, D81
Record Number:CaltechAUTHORS:20190531-110425860
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:96005
Deposited By: Tony Diaz
Deposited On:31 May 2019 19:52
Last Modified:03 Oct 2019 21:18

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