Information Percolation
Summary
As agents in a large market meet in groups and reveal what they know, the cross-sectional distribution of beliefs has an explicit solution. Beliefs converge to a common posterior exponentially, at a rate equal to the mean rate at which an individual agent is matched, regardless of the size of the groups that meet.
Abstract
We study the "percolation" of information of common interest through a large market as agents encounter and reveal information to each other over time. We provide an explicit solution for the dynamics of the cross-sectional distribution of posterior beliefs. We also show that convergence of the cross-sectional distribution of beliefs to a common posterior is exponential and that the rate of convergence does not depend on the size of the groups of agents that meet. The rate of convergence is merely the mean rate at which an individual agent is matched.
How to cite
Duffie, Darrell, Gaston Giroux, and Gustavo Manso (2010). Information Percolation. American Economic Journal: Microeconomics 2, 100–111.
@article{duffie2010information,
author = {Duffie, Darrell and Giroux, Gaston and Manso, Gustavo},
title = {Information Percolation},
journal = {American Economic Journal: Microeconomics},
volume = {2},
number = {1},
pages = {100–111},
year = {2010},
doi = {10.1257/mic.2.1.100}
}