A single-judge solution to beauty contests
By: Huo, Zhen and Pedroni, Marcelo
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Material type: 
BookPublisher: The American Economic Review Description: 110(2), Feb, 2020: p.526-568.Subject(s): The general theory of employment, interest, and money
In:
The American Economic Review Summary: We show that the equilibrium policy rule in beauty contest models is equivalent to that of a single agent's forecast of the economic fundamental. This forecast is conditional on a modified information process, which simply discounts the precision of idiosyncratic shocks by the degree of strategic complementarity. The result holds for any linear Gaussian signal process (static or persistent, stationary or nonstationary, exogenous or endogenous), and also extends to network games. Theoretically, this result provides a sharp characterization of the equilibrium and its properties under dynamic information. Practically, it provides a straightforward method to solve models with complicated information structures.- Reproduce
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Articles
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Indian Institute of Public Administration | 110(2), Feb, 2020: p.526-568. | Available | AR123255 |
We show that the equilibrium policy rule in beauty contest models is equivalent to that of a single agent's forecast of the economic fundamental. This forecast is conditional on a modified information process, which simply discounts the precision of idiosyncratic shocks by the degree of strategic complementarity. The result holds for any linear Gaussian signal process (static or persistent, stationary or nonstationary, exogenous or endogenous), and also extends to network games. Theoretically, this result provides a sharp characterization of the equilibrium and its properties under dynamic information. Practically, it provides a straightforward method to solve models with complicated information structures.- Reproduce
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