Quid pro Quo: Friendly Information Exchange between Rivals

Andeas Blume*, In-Uck Park*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

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Abstract

We show that information exchange via disclosure is possible in equilibrium even when it is certain that whenever one party learns the truth, the other loses. The incentive to disclose results either from an expectation of disclosure being reciprocated -- the quid pro quo motive -- or from the possibility of learning from the rival's failure to act in response to a disclosure -- the screening motive. Alternating and gradual disclosures are generally indispensable for information exchange and the number of disclosure rounds grows without bound if the agents' initial information becomes sufficiently diffuse -- in that sense, the less informed agents are the more they talk. Patient individuals can achieve efficiency by means of continuous alternating disclosures of limited amounts of information. This provides a rationale for protracted dialogues.
Original languageEnglish
Pages (from-to)1183-1223
Number of pages41
JournalTheoretical Economics
Volume17
Issue number3
DOIs
Publication statusPublished - 28 Jul 2022

Bibliographical note

Publisher Copyright:
Copyright © 2022 The Authors.

Keywords

  • alternating information disclosure
  • dynamic communication
  • two-sided incomplete information

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