Applications of Dynamic Information Design

Northwestern University, Evanston IL

Investigators

Abstract

This award funds research in economic theory. Information guides decisions and as such it is a unique policy tool for coordinating and incentivizing economic behavior. Indeed, it can often be at least as powerful motivator as costly pecuniary incentives but by contrast information is often free. This project will advance our understanding of information as a policy instrument by studying the incentive effects of information disclosures over time. When funds must be collected toward financing a public project, how frequent and informative should be periodic disclosures about progress toward the goal? In competition for public contracts or resources, how and when should feedback be provided to contestants to maximize the gains from competition? When should policymakers communicate privately with individual parties and when are public disclosures more effective? These questions are formally addressed using new methods in the theory of extensive-form games with incomplete information. Traditionally, game theory has proceeded by taking as given the structure of information held by the players and applied solution concepts such as Sequential Equilibrium to make predictions. When instead we want to study how information can alter the outcomes of strategic interactions we need tools for summarizing all solutions obtained as the information structure varies. Then, the best use of information can be formalized as an optimization problem over this feasible set. This project develops the tools to carry out this analysis in two types of environments: specific settings in which the dynamic structure of interactions is given, and general settings in which that aspect of the game is part of the design alongside the information structure. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.