Full Information Revelation Research Articles

The Informational Role of Supermajorities

We study a collective decision making environment where an agenda setter makes strategic proposals to privately informed voters who vote strategically. We show that, consistent with empirical evidence, it can be optimal for the agenda setter to propose supermajorities. Due to an informational role that we unveil, supermajorities can be less costly than minimum winning coalitions, even though more voters are awarded a positive share. We also examine consequences in terms of quality of decision making. We show that the introduction of a strategic agenda setter can lead to socially suboptimal decisions. Finally we add a debate phase prior to the vote and we show that it can be optimal for the agenda setter to make proposals that create conflicts of interest and prevent full information revelation during the debate.

Monopoly Provision of Tune-Ins

This paper analyzes a single television station's choice of airing tune-ins (preview advertisements). I consider two consecutive programs located along a unit line. Potential viewers know the earlier program but are uncertain about the later one. The TV station may air a fully informative tune-in during the first program. The cost of the tune-in is the forgone advertising revenue. Under mild conditions, there exists a unique perfect Bayesian equilibrium in which some viewers watch the first program just to see if there is a tune-in or not, and the TV station airs a tune-in unless the two programs are too dissimilar. In the absence of a tune-in, no viewer within the first-period audience keeps watching TV. Full information disclosure never arises. The market outcome is suboptimal; a social planner would air a tune-in for a wider range of programs.

Lobbying with two audiences: Public vs private certification

This paper compares public and private information certification in a simple class of communication games with one sender and two receivers. It is shown that, contrary to the cheap talk setting of [Farrell, J., Gibbons, R., 1989. Cheap talk with two audiences. American Economic Review 79, 1214–1223], allowing certifiable statements excludes mutual discipline (i.e., full information revelation in public but not in private) but allows for mutual subversion (i.e., full information revelation in private but not in public). In the latter case, the sender is always better off with public communication, while in other situations he may prefer either private or public communication. Compared to the previous models of strategic information revelation the paper also emphasizes the role of the “common belief ” consistency condition of the strong version of sequential equilibrium.

Information Percolation in Large Markets

We introduce a simple model of the “percolation” of information of common interest through a large market, as agents encounter each other over time and reveal information to each other, some of which they may have received earlier from other agents. We are particularly interested in the evolution over time of the cross-sectional distribution in the population of the posterior probability assignments of the various agents. We provide a market example based on privately held auctions, and obtain a relatively explicit solution for the cross-sectional distribution of posterior beliefs at each time. Our results contribute to the literature on information transmission in markets. Hayek (1945) argues that markets allow information that is dispersed in a population to be revealed through prices. Grossman’s (1981) notion of a rational-expectations equilibrium formalizes this idea in a setting with price-taking agents. Milgrom (1981), Pesendorfer and Swinkels (1997), and Reny and Perry (2006) provide strategic foundations for the rational expectations equilibrium concept in centralized markets. A number of important markets, however, are decentralized. These include over-the-counter markets and private-auction markets. Wolinsky (1990) and Blouin and Serrano (2002) study information transmission in decentralized markets. In contrast to these two papers, equilibrium behavior in our market example leads to full revelation of information We happily acknowledge conversations with Manuel Amador, Frank Kelly, Jeremy Stein, and Pierre-Olivier Weill, and research assistance from Sergey Lobanov. Rubinstein and Wolinsky (1985) and Gale (1986a, 1986b) study decentralized markets without asymmetric information. Satterthwaite and Shneyerov (2003) study decentralized market with private-value asymmetric information. Amador and Weill (2006) study a more abstract setting regarding transmission of common and private i nformation.

Information Disclosure Policies: When Do They Bring Environmental Improvements?

There has been a growing interest among policy makers on the use of information disclosure policies for pollution control. This paper theoretically assesses the consequences of information disclosure policies and identifies the conditions under which such policies are likely to bring environmental improvements. Based on a dynamic game framework, the paper shows that both eco-labeling and more general full information disclosure policies may not always result in pollution reduction. Full information disclosure policies are likely to be effective if the product is not heavily polluting and if the minimum quality standard is set quite low. The paper also identifies the conditions under which all consumers are strictly better off with information disclosure policies.

Deliberation, Preference Uncertainty, and Voting Rules

A deliberative committee is a group of at least two individuals who first debate about what alternative to choose prior to these same individuals voting to determine the choice. We argue, first, that uncertainty about individuals' private preferences is necessary for full information sharing and, second, demonstrate in a very general setting that the condition under which unanimity can support full information revelation in debate amounts to it being common knowledge that all committee members invariably share identical preferences over the alternatives. It follows that if ever there exists an equilibrium with fully revealing debate under unanimity rule, there exists an equilibrium with fully revealing debate under any voting rule. Moreover, the converse is not true of majority rule if there is uncertainty about individuals' preferences.

Market Power and Information Revelation in Dynamic Trading

We study a strategic model of dynamic trading where agents are asymmetrically informed over common value sources of uncertainty. There is a continuum of uninformed buyers and a finite number of sellers, some of them informed. When there is only one seller, full information revelation never occurs in equilibrium and the only information transmission happens in the first period. The outcome with n sellers depends both on the structure of sellers� information and the intensity of competition among them allowed by the market rules. We show that the latter plays an even more important role. With intense competition (absence of clienteles), information is fully and immediately revealed to the buyers in every equilibrium for n large enough, both when all sellers are informed and when only one seller is informed. On the other hand, with a less intense form of competition (presence of clienteles), collusive equilibria, where information is never revealed, also exist, whatever the number of sellers. Moreover, when only one seller is informed, for many parameter configurations there are no equilibria with full information revelation, for any n.

Bidding in sealed-bid and English multi-attribute auctions

In this paper we consider an extension of the traditional auction mechanism, the multi-attribute auction, which enables negotiation on several attributes in addition to the price of the item. In particular, we consider a procurement auction in which the buyer is the auctioneer and the sellers are the bidders. Such domains include auctions on task allocation, services, etc. We focus on three auction protocols for the case of multi-attribute items; a variation of the first-price sealed-bid protocol termed first-score sealed-bid, a variation of the second-price sealed-bid protocol termed second-score sealed-bid, and a variation of the English auction protocol termed sequential full information revelation. We analyze a specific model for these protocols and we provide optimal and stable strategies for the auctioneer agent and for the bidder agents participating in multi-attribute auctions. In addition, we analyze the auctioneer's/buyer's expected payoff and suggest an optimal scoring rule to be announced according to the protocol. Finally, we reveal that the buyer's expected payoff in all three protocols, the first-score-sealed-bid auction, the second-score sealed-bid auction and the English auction, differ only by a predefined constant. We prove that the optimal scoring rule is equal in all three protocols. This result can be interpreted as the extension of the equivalence theory of the single attribute for the case of multi-attribute items.

Policy Advice with Imperfectly Informed Experts

We study policy advice by several experts with noisy private information and biased preferences. We highlight a trade-off between the truthfulness of the information revealed by each expert and the number of signals from different experts that can be aggregated to reduce noise. Contrary to models with perfectly informed experts, because of this trade-off, full revelation of information is never possible. However, almost fully efficient information extraction can be obtained in two cases. First, there is an equilibrium in which the outcome converges to the first best benchmark with no asymmetric information as we increase the precision the experts' signals. Second, the inefficiency in communication also converges to zero as the number of experts increases, even when the residual noise in the experts' private signals is large and all the experts have significant and similar (but not necessarily identical) biases.

Market Power and Information Revelation in Dynamic Trading

We study a strategic model of dynamic trading where agents are asymmetrically informed over common value sources of uncertainty. There is a continuum of buyers and a finite number n of sellers. All buyers are uninformed, while at least one seller is privately informed about the true state of the world. When n = 1, full information revelation never occurs in equilibrium and the only information transmission happens in the first period. With n > 1 the outcome depends both on the structure of the sellers' information and, even more importantly, on the intensity of competition allowed by the trading rules. When there is intense competition (absence of clienteles), information is fully and immediately revealed to the buyers in every equilibrium for n large enough, regardless of the number of informed sellers. On the other hand, for trading arrangements characterized by less intense forms of competition (presence of clienteles), for any n we always have equilibria where information is never fully revealed. Moreover, in that case, when only one seller is informed, for many parameter configurations there are no equilibria with full information revelation, even for large n.

Multiple Referrals and Multidimensional Cheap Talk

In previous work on cheap talk, uncertainty has almost always been modeled using a single-dimensional state variable. In this paper we prove that the dimensionality of the uncertain variable has an important qualitative impact on results and yields interesting insights into the mechanics of information transmission. Contrary to the unidimensional case, if there is more than one sender, full revelation of information in all states of nature is generically possible, even when the conflict of interest is arbitrarily large. What really matters in transmission of information is the local behavior of senders' indifference curves at the ideal point of the receiver, not the proximity of players' ideal point.

A Role for Monetary Policy when Prices Reveal Information: An Example

In an example, monetary policy can determine the information revealed by prices, and thus it can be effective. Monetary policy that varies only with public information can guarantee the full revelation of information at equilibrium, which is optimal. Full indexation need not attain full revelation and, as a consequence, need not implement an optimal allocation. Journal of Economic Literature Classification Numbers: D52, D82, E52.

Information Revelation and Certification Intermediaries

I discuss the role of intermediaries that search out the information of privately informed parties and then choose what to reveal to uninformed parties. The focus is on the strategic manipulation of information by these certification intermediaries. I show that in a class of environments the optimal choice for a monopoly intermediary is to reveal only whether quality is above some minimal standard. Despite this minimal information transmission, the intermediary can capture a large share of the surplus. I also show that competition among the intermediaries can lead to full information revelation.