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Relying on the Information of Interested Parties
Paul Milgrom and John Roberts
The RAND Journal of Economics
Vol. 17, No. 1 (Spring, 1986), pp. 18-32
Stable URL: http://www.jstor.org/stable/2555625
Page Count: 15
You can always find the topics here!Topics: Games, Skepticism, Mechanism design, Nash equilibrium, Relevant alternatives, Information relevance, Persuasion, Prices, Economic regulation, Economic theory
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We investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information. We find that, if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties, competition may be unnecessary to achieve this result. If the decisionmaker is unsophisticated or not well informed, competition is not generally sufficient. If the interested parties' interests are sufficiently opposed, however, or if the decisionmaker is seeking to advance the parties' welfare, then competition can reduce or even eliminate the decisionmaker's need for prior knowledge about the relevant variables and for strategic sophistication. In other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking.
The RAND Journal of Economics © 1986 RAND Corporation