טכניון מכון טכנולוגי לישראל
הטכניון מכון טכנולוגי לישראל - בית הספר ללימודי מוסמכים  
M.Sc Thesis
M.Sc StudentZoa'bi Weam
SubjectInformation Advatage in a Public Good Economy with
a State-dependent Cobb-Douglas Utility
DepartmentDepartment of Industrial Engineering and Management
Supervisor Professor Benyamin Shitovitz
Full Thesis text - in Hebrew Full thesis text - Hebrew Version


Abstract

Information advantage is an important subject in theoretical literature. Many researchers studied information advantage in different models, they proved it just in some models.

When we refer to information advantage, we are comparing the equilibrium utilities of two consumers with different information in the same economy, and when we compare equilibrium utilities of one consumer in two different
economies, we refer to Information value.

In this project we study the information advantage in a public good economy with a state-dependent Cobb-Douglas utility that satisfies the assumptions which guarantee existence and uniqueness of Bayesian equilibrium. We try to answer the question: Does more information lead to more utility to a consumer in this specific model?

In our model there are two consumers who differ in their private information, each consumer determines how much to consume and how much to contribute to the public good by maximization conditional expected utility, while the first consumer has full information, the second consumer has null information. We say that Cobb-Douglas utility satisfies cardinal normality conditions which guarantee existence of Bayesian equilibrium. We also say that the information partitions of consumers in our model can be ranked from the finest to the coarsest partitions that lead to uniqueness. We compared the values of the expected utility of consumers in Bayesian equilibrium to realize how superior information reflects on utilities.

We find an information advantage in a public good economy with a state-dependent Cobb-Douglas utility in interior Bayesian equilibrium.
In the first chapter of this project we see a public good economy with full information for all consumers and the assumptions that lead to the existence of a unique Nash equilibrium, and how the Cobb-Douglas utility satisfies these
assumptions.
In the second chapter we review the Bayesian equilibrium in a public good. We review whether the Bayesian equilibrium exists and whether it is unique in general, regardless of the number of consumers.

In the third chapter we show that the Bayesian equilibrium exists and is unique in our specific model and that it evaluates the expected utility of two consumers, and find that these values determines the information advantage,
which is the main theorem in our project.