Research on Monday Rotterdam

Martin Osborne (University of Toronto, Canada)
Monday, May 9, 2016

A group of individuals with common interests has to choose a binary option whose desirability depends on an unknown binary state of the world. The individuals independently and privately observe a signal whose distribution depends on the state. Each individual chooses whether to reveal her signal, at a cost. We show that if for all revelation choices of the individuals the option chosen by the group is optimal given the signals revealed and the set of individuals who do not reveal signals, then in a large group few signals are revealed, and these signals are extreme. When sufficiently informative signals exist, each individual reveals only signals that exceed a threshold and the group chooses the action appropriate for the state suggested by a signal above the threshold if and only if at least one signal is revealed. If the group can commit to use an anonymous decision rule that does not necessarily select the best option given the signals revealed, it can do no better, but if the rule can be non-anonymous then an improvement in welfare is possible.