Econometrica: Nov 2017, Volume 85, Issue 6

Value of Persistent Information

https://doi.org/10.3982/ECTA14330
p. 1921-1948

Marcin Pęski, Juuso Toikka

We develop a theory of how the value of an agent's information advantage depends on the persistence of information. We focus on strategic situations with strict conflict of interest, formalized as stochastic zero-sum games where only one of the players observes the state that evolves according to a Markov operator. Operator Q is said to be better for the informed player than operator P if the value of the game under Q is higher than under P regardless of the stage game. We show that this defines a convex partial order on the space of ergodic Markov operators. Our main result is a full characterization of this partial order, intepretable as an ordinal notion of persistence relevant for games. The analysis relies on a novel characterization of the value of a stochastic game with incomplete information.

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