Strategic information transmission: a mathematica tool for analysis

Dickhaut, John and Kaplan, Todd R and Mukherji, Arijit (1992): Strategic information transmission: a mathematica tool for analysis.

Abstract

Economists and other applied researchers use game theory to study industrial organization, financial markets, and the theory of the firm. In an earlier article in the Mathematica Journal, [Dickhaut and Kaplan 1991] present a procedure for solving two-person games of complete information. In many applications, however, "asymmetric information" is a central issue. By asymmetric information, we mean that one party has access to information that the other party lacks. The branch of game theory that deals with this problem is known as "games of incomplete information"; the formal model is discussed in [Harsanyi 1967]. [Myerson 1991, Tirole 1989] et al, discuss the applications but do not focus on computational procedures. We provide, in this article, an application of Mathematica to games of incomplete information that should be of interest for two reasons: (i) as a basis for thinking about solutions to games of incomplete information, and (ii) as an approach to understanding the particular application presented here, namely, the effect of strategic information transmission in firms and markets.

• Item Type: MPRA Paper
• Language: English
• Keywords: Mathematica; Strategic Information Transmission; Crawford Sobel Model
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

References

Crawford V. and Sobel J., Strategic Information Transmission. Econometrica 50: 1982

Dickhaut J. and Kaplan T. A Program for Finding Nash Equilibria. The Mathematica Journal 1(4) 1991

Myerson R., Game Theory. Cambridge, Mass: Harvard University Press 1991

Harsanyi J., Games of Incomplete Information Played by 'Bayesian' Players. Management Science 14: 1967

Tirole J., The Theory of Industrial Organization. Boston, Mass: M.I.T. Press 1989