Heterogeneous beliefs and the value of scientific information

Late lunch talk by Hiro Sakamoto

In this paper, we consider a game where the benefit of a public good is uncertain and players have heterogenous beliefs about the benefit. We examine the impact of public information which influences players' behaviors by reshaping their beliefs. Typical examples of such a game include climate change, in which well-publicized scientific information plays an important role in facilitating coordination among players. We found that even when the benefit of public good is underestimated by players, provision of public information decreases welfare if the information is not significantly novel to players and if the beliefs are sufficiently homogeneous. When the beliefs are highly heterogenous, on the other hand, every player will be better off by gaining access to new information, but can be further better off if a certain amount of noise is added to the information.

Published Aug. 26, 2013 2:28 PM - Last modified Sep. 5, 2013 11:35 AM