Munich Personal RePEc Archive

When are Signals Complements or Substitutes?

Börgers, Tilman and Hernando-Veciana, Angel and Krähmer, Daniel (2010): When are Signals Complements or Substitutes?

[img]
Preview
PDF
MPRA_paper_29124.pdf

Download (342Kb) | Preview

Abstract

The paper introduces a notion of complementarity (substitutability) of two signals which requires that in all decision problems each signal becomes more (less) valuable when the other signal becomes available. We provide a general characterization which relates com- plementarity and substitutability to a Blackwell comparison of two auxiliary signals. In a setting with a binary state space and binary signals, we find an explicit characteriza- tion that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to more general settings.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.