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Interpreted and generated signals

Author

Listed:
  • Hong, Lu
  • Page, Scott

Abstract

Private information is typically modeled as signals. A joint probability distribution captures relationships between signals and between signals and relevant variables. In this paper, we define and contrast two types of signals: generated and interpreted. We demonstrate that even though the standard assumption of conditional independence is a reasonable benchmark assumption for generated signals, it imposes a specific, and unlikely structure on interpreted signals. We also show that independent interpreted signals are negatively correlated in their correctness, but generated signals can be independent. Our findings may limit the contexts in which many models of information aggregation and strategic choices in auctions, markets, and voting apply.

Suggested Citation

  • Hong, Lu & Page, Scott, 2009. "Interpreted and generated signals," Journal of Economic Theory, Elsevier, vol. 144(5), pages 2174-2196, September.
  • Handle: RePEc:eee:jetheo:v:144:y:2009:i:5:p:2174-2196
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    References listed on IDEAS

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    Cited by:

    1. Oktay Sürücü, 2014. "Lying for the Greater Good: Bounded Rationality in a Team," The International Journal of Economic Behavior - IJEB, Faculty of Business and Administration, University of Bucharest, vol. 4(1), pages 151-163.
    2. Tatiana Bouzdine-Chameeva & Julien Cusin & Olivier Herrbach & Vincent Maymo, 2023. "Entrepreneurs are from Mars, bankers from Venus: Representational gaps between struggling entrepreneurs and loan officers," Post-Print hal-04412624, HAL.
    3. Economo, Evan & Hong, Lu & Page, Scott E., 2016. "Social structure, endogenous diversity, and collective accuracy," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 212-231.
    4. Nicolas Roux & Joel Sobel, 2015. "Group Polarization in a Model of Information Aggregation," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 202-232, November.
    5. repec:but:manage:v:4:y:2014:i:1:p:151-163 is not listed on IDEAS
    6. Felipe A. Csaszar & Daniel A. Levinthal, 2016. "Mental representation and the discovery of new strategies," Strategic Management Journal, Wiley Blackwell, vol. 37(10), pages 2031-2049, October.
    7. Kevin He & Fedor Sandomirskiy & Omer Tamuz, 2021. "Private Private Information," Papers 2112.14356, arXiv.org, revised Sep 2024.
    8. Ernst, Philip & Pemantle, Robin & Satopää, Ville & Ungar, Lyle, 2016. "Bayesian aggregation of two forecasts in the partial information framework," Statistics & Probability Letters, Elsevier, vol. 119(C), pages 170-180.
    9. Hélène Landemore & Scott E. Page, 2015. "Deliberation and disagreement," Politics, Philosophy & Economics, , vol. 14(3), pages 229-254, August.
    10. Ville A. Satopää & Robin Pemantle & Lyle H. Ungar, 2016. "Modeling Probability Forecasts via Information Diversity," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 111(516), pages 1623-1633, October.
    11. Michael Morreau, 2020. "Supergrading: how diverse standards can improve collective performance in ranking tasks," Theory and Decision, Springer, vol. 88(4), pages 541-565, May.

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