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Title:When are signals complements or substitutes? PDF Logo
Authors:Börgers, Tilman
Hernando-Veciana, Angel
Kröhmer, Daniel
Issue Date:2010
Series/Report no.:Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1488
Abstract:The paper introduces a notion of complementarity (substitutability) of two signals which requires that in all decision problems each signal becomes more (less) valuable when the other signal becomes available. We provide a general characterization which relates complementarity and substitutability to a Blackwell comparison of two auxiliary signals. In a setting with a binary state space and binary signals, we find an explicit characterization that permits an intuitive interpretation of complementarity and substitutability. We demonstrate how these conditions extend to more general settings.
Subjects:Complementarity
substitutability
value of information
Blackwell ordering
JEL:C00
C44
D81
D83
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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