M.Sc Student | Zoa'bi Weam |
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Subject | Information Advatage in a Public Good Economy with a State-dependent Cobb-Douglas Utility |

Department | Department of Industrial Engineering and Management |

Supervisor | Professor Benyamin Shitovitz |

Full Thesis text - in Hebrew |

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.