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When are signals complements or substitutes?

Börgers, Tilman; Hernando-Veciana, Angel; Krähmer, Daniel

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Authors

Tilman Börgers

Daniel Krähmer



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 complementarity 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 characterization that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to more general settings. We also illustrate the implications of our concepts for three economic applications: information disclosure in auctions, information aggregation through voting, and polarization of beliefs.

Citation

Börgers, T., Hernando-Veciana, A., & Krähmer, D. (2013). When are signals complements or substitutes?. Journal of Economic Theory, 148(1), 165-195. https://doi.org/10.1016/j.jet.2012.12.012

Journal Article Type Article
Acceptance Date Jul 20, 2012
Online Publication Date Dec 13, 2012
Publication Date Jan 1, 2013
Deposit Date Jun 15, 2018
Publicly Available Date Jun 28, 2018
Journal Journal of Economic Theory
Print ISSN 0022-0531
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 148
Issue 1
Pages 165-195
DOI https://doi.org/10.1016/j.jet.2012.12.012
Public URL https://durham-repository.worktribe.com/output/1328701

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