Dresden 2011 – scientific programme

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 15: Economic Models and Evolutionary Game Theory I (with BP, DY)

SOE 15.4: Talk

Wednesday, March 16, 2011, 14:45–15:00, GÖR 226

The value of information in strategic interaction — •Eckehard Olbrich¹, Nils Bertschinger¹, David Wolpert², and Jürgen Jost¹ — ¹Max Planck Institut für Mathematik in den Naturwissenschaften, Leipzig — ²NASA Ames Research Center

In games against nature information always has a positive value, i.e. knowing more increases the single player's utility. However in situations with more than one strategic player having more information can be disadvantageous to a player, if the other players know about this extra information. Games with a first mover advantage are a simple example. However, Bagwell [1] showed that this effect of extra information on player behavior and payoffs could be destroyed by an infinitesimal amount of observational noise when players are fully rational. We study the effects of information in a more general setting, by using the Quantal Response Equilibria (QRE) as the (bounded rationaity) solution concept. By using the QRE we can exploit tools from information theory to rephrase the problem of the value of information in terms of rate distortion theory. In particular, we can analyze how the position of the QRE's depend on the capacity of the information channels connecting the players and Nature variables, and on the rationalities of the players. We focus on hysteresis effects in this dependence, and its impact on social welfare.

[1] K. Bagwell, Commitment and Observability in Games, Games and Economic Behavior 8, 271-280 (1995) [2] D. H. Wolpert, M. Harre, E. Olbrich, N. Bertschinger, J. Jost, Hysteresis effects of changing parameters of noncooperative games, arXiv:1010.5749v1 [cs.GT]