CFDP 2088

CFDP Title: 

Information and Interaction

Publication Date: May, 2017

Pages: 50pp


We study a linear interaction model with asymmetric information. We first characterize the linear Bayes Nash equilibrium for a class of one dimensional signals. It is then shown that this class of one dimensional signals provide a comprehensive description of the first and second moments of the distribution of outcomes for any Bayes Nash equilibrium and any information structure.

We use our results in a variety of applications: (i) we study the connections between incomplete information and strategic interaction, (ii) we explain to what extent payoff environment and information structure of a economy are distinguishable through the equilibrium outcomes of the economy, and (iii) we analyze how equilibrium outcomes can be decomposed to understand the sources of individual and aggregate volatility. 


Networks, Incomplete Information, Bayes Correlated Equilibrium, Volatility, Moments Restrictions, Linear Best Responses, Quadratic Payoffs

JEL Classifications: 
JEL Classification: 
C72, C73, D43, D83