Value of Persistent Information
Econometrica · 2017 · Volume 85 · Issue 6
Abstract
We develop a theory of how the value of an agent's information advantage depends on the persistence of information. We focus on strategic situations with strict conflict of interest, formalized as stochastic zero-sum games where only one of the players observes the state that evolves according to a Markov operator. OperatorQis said to be better for the informed player than operatorPif the value of the game underQis higher than underPregardless of the stage game. We show that this defines a convex partial order on the space of ergodic Markov operators. Our main result is a full characterization of this partial order, intepretable as an ordinal notion of persistence relevant for games. The analysis relies on a novel characterization of the value of a stochastic game with incomplete information.
Keywords
Dynamic games, incomplete information, Markov chains
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