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Information in Continuous Time Decision Models with Many Agents

Published online by Cambridge University Press:  27 July 2009

Bruno Bassan ,
Monica Brezzi  and
Marco Scarsini
Bruno Bassan
Affiliation:
Dipartimento di Matematica, Politecnico di Milano, Piazza Leonardo da Vinci 32, 1-20133 Milano. Italy
Monica Brezzi
Affiliation:
Dipartimento di Scienze Statistiche, Università di Padova, Via San Francesco 33, 1-35127 Padova, Italy
Marco Scarsini
Affiliation:
Dipartimento di Scienze, Università D'Annunzio, Viale Pindaro 42, 1-65127 Pescara, Italy
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Extract

Several agents with different subjective probabilities make a binary decision at a time determined by a planner. Each agent chooses the action that has the highest probability of success. Given that their probabilities differ, so will their choices. From time 0 until decision time, all the agents are entitled to access the same increasing flow of information. The planner, who gains from having as many agents as possible making the right choice, faces the following tradeoff: the more information she feeds to the agents, the better off they will be in making their decisions, but the less likely they will be to diversify their actions, so the more difficult it will be for her to hedge her positions. The model gives rise to a continuous time optimal stopping problem.

Type
Research Article
Information
Probability in the Engineering and Informational Sciences , Volume 10 , Issue 4 , October 1996 , pp. 543 - 555
Copyright
Copyright © Cambridge University Press 1996

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