Learning and coordination with dispersed information |
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| Institution: | 1. School of Mathematics, University of Leeds, United Kingdom;2. Economics, School of Social Sciences, University of Manchester, United Kingdom;3. Department of Finance, NHH–Norwegian School of Economics, Norway;4. Saïd Business School, University of Oxford, United Kingdom;5. Centre for Advanced Studies in Finance, University of Leeds, United Kingdom;1. Instituto de Economía, Pontificia Universidad Católica de Chile, Chile;2. Department of Economics, University of Washington, 305 Savery Hall, Box 353330, Seattle, WA 98195, United States;1. Finance Center Muenster, University of Muenster, Universitätsstr. 14-16, D-48143 Münster, Germany;2. House of Finance, Goethe University Frankfurt, Theodor-W.-Adorno-Platz 3, D-60323 Frankfurt am Main, Germany;3. Oliver Wyman, Friedrich-Ebert-Anlage 49, D-60308 Frankfurt am Main, Germany;1. Senshu University, 2-1-1 Higashimita, Tama-ku, Kawasaki, Kanagawa 214-8580, Japan;2. The Canon Institute for Global Studies, 1-5-1 Marunouchi, Chiyoda-ku, Tokyo 100-6511 Japan;1. Finance Center Muenster, University of Muenster, Universitaetsstr. 14-16, 48143 Muenster, Germany;2. Mercator School of Management, University of Duisburg–Essen, Lotharstr. 65, 47057 Duisburg, Germany |
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| Abstract: | We analyse adaptive learning in a model of incomplete and dispersed information, with externalities and strategic interactions. We build on the framework proposed by Angeletos and Pavan (2007a) and extend it to a dynamic multi-period setting where agents need to learn to coordinate. We derive conditions under which adaptive learning obtains in such setting and show that, when actions are strategic substitutes, the information structure affects the speed of convergence: while more precise private information is beneficial, better public information has negative effects. We also show that adaptive learning dynamics converge to the Bayesian Nash equilibrium, which means that agents can learn to act strategically by relying only on observable (exogenous) information. |
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| Keywords: | Learning Heterogeneity Dispersed information Interaction Coordination |
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