Information Percolation With Equilibrium Search Dynamics

By Darrell Duffie, Semyon Malamud, Gustavo Manso. 2008

88 citations recorded by the source corpus.

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 search 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.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/0b350d5a3070916e9a51503550e588aea9a2a2a9

Citations in the corpus

• Information Percolation, Momentum and Reversal (2014, unknown): “To do so, we use the information percolation theory (Duffie, Malamud, and Manso, 2009).”
• Presidential Address: Social Transmission Bias in Economics and Finance (2020, unknown): “In these models, rational agents meet and sequentially exchange private signals about the payoff of some action of common interest (e.g., Duffie, Malamud, and Manso (2009)).”