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Measuring agents’ reaction to private and public information in games with strategic complementarities

Published online by Cambridge University Press:  14 March 2025

Camille Cornand*
Affiliation:
GATE CNRS, Lyon University, 93 Chemin des Mouilles, BP 167, 69131 Ecully Cedex, France
Frank Heinemann*
Affiliation:
Technische Universität Berlin, H 52, Straße des 17. Juni 135, 10 623 Berlin, Germany

Abstract

In games with strategic complementarities, public information about the state of the world has a larger impact on equilibrium actions than private information of the same precision, because public signals are more informative about the likely behavior of others. We present an experiment in which agents’ optimal actions are a weighted average of the fundamental state and their expectations of other agents’ actions. We measure the responses to public and private signals. We find that, on average, subjects put a larger weight on the public signal. In line with theoretical predictions, as the relative weight of the coordination component in a player’s utility increases, players put more weight on the public signal when making their choices. However, the weight is smaller than in equilibrium, which indicates that subjects underestimate the information contained in public signals about other players’ beliefs.

Type
Manuscript
Copyright
Copyright © 2013 Economic Science Association

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Footnotes

Electronic Supplementary Material The online version of this article (doi:https://doi.org/10.1007/s10683-013-9357-9) contains supplementary material, which is available to authorized users.

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