Final Report Summary - INFORMATIONFLOW (Information Flow and Its Impact on Financial Markets)
The general framework of this project is that of disclosure games. In such a game one agent holds some pieces of evidence whose nature is unknown. This framework is relevant among other things for financial market where firms decide which information to disclose and when. The market reward firms and managers based on their perceived value or type.
We have advanced this research along different lines among them: (i) studying dynamic models in which there are multiple pieces of evidence that can be disclosed over time, (ii) comparison of optimal mechanism outcome to a game in which the receiver cannot commit, (iii) the effect the agent when he is aware of the fact that the receiver or the market may hold additional pieces of information. Additional work has been devoted to models that consider optimal mechanism design that implement wisdom of the crowds. We examine disclosure of information by a principal who faces a sequence of agents who take an action and may acquire information. The information that is disclosed to agents affects their incentives to herd and not invest in obtaining new information.
We have advanced this research along different lines among them: (i) studying dynamic models in which there are multiple pieces of evidence that can be disclosed over time, (ii) comparison of optimal mechanism outcome to a game in which the receiver cannot commit, (iii) the effect the agent when he is aware of the fact that the receiver or the market may hold additional pieces of information. Additional work has been devoted to models that consider optimal mechanism design that implement wisdom of the crowds. We examine disclosure of information by a principal who faces a sequence of agents who take an action and may acquire information. The information that is disclosed to agents affects their incentives to herd and not invest in obtaining new information.