Coordination with flexible information acquisition

  • Yang M
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Abstract

We study flexible information acquisition in a coordination game. "Flexible" acquisition means that players choose not only how much but also what kind of information to acquire. Information acquisition has a cost proportional to reduction of entropy. Hence, players will collect the information most relevant to their welfare but can be rationally inattentive to other aspects of the fundamental. When information is cheap, this flexibility enables players to acquire information that makes efficient coordination possible, which also leads to multiple equilibria. This result contrasts with the global game literature, where information structure is less flexible and cheap information leads to a unique equilibrium with inefficient coordination.

Author-supplied keywords

  • Coordination game
  • Flexible information acquisition
  • Rational inattention

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Authors

  • Ming Yang

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