Strategic Information Acquisition: Applications to Herding and Auctions

The information that the economic agents have and regard relevant to their decision making is often assumed to be exogenous in economics. It is assumed that the agents either poses or can observe the payoff relevant information without having to exert any effort to acquire it. In this thesis we relax the assumption of ex-ante fixed information structure and study what happens to the equilibrium behavior when the agents must also decide what information to acquire and when to acquire it. This thesis addresses this question in the two essays on herding and two essays on auction theory. In the first two essays, that are joint work with Klaus Kultti, we study herding models where it is costly to acquire information on the actions that the preceding agents have taken. In our model the agents have to decide both the action that they take and additionally the information that they want to acquire by observing their predecessors. We characterize the equilibrium behavior when the decision to observe preceding agents' actions is endogenous and show how the equilibrium outcome may differ from the standard model, where all preceding agents actions are assumed to be observable. In the latter part of this thesis we study two dynamic auctions: the English and the Dutch auction. We consider a situation where bidder(s) are uninformed about their valuations for the object that is put up for sale and they may acquire this information for a small cost at any point during the auction. We study the case of independent private valuations. In the third essay of the thesis we characterize the equilibrium behavior in an English auction when there are informed and uninformed bidders. We show that the informed bidder may jump bid and signal to the uninformed that he has a high valuation, thus deterring the uninformed from acquiring information and staying in the auction. The uninformed optimally acquires information once the price has passed a particular threshold and the informed has not signalled that his valuation is high. In addition, we provide an example of an information structure where the informed bidder initially waits and then makes multiple jumps. In the fourth essay of this thesis we study the Dutch auction. We consider two cases where all bidders are all initially uninformed. In the first case the information acquisition cost is the same across all bidders and in the second also the cost of information acquisition is independently distributed and private information to the bidders. We characterize a mixed strategy equilibrium in the first and a pure strategy equilibrium in the second case. In addition we provide a conjecture of an equilibrium in an asymmetric situation where there is one informed and one uninformed bidder. We compare the revenues that the first price auction and the Dutch auction generate and we find that under some circumstances the Dutch auction outperforms the first price sealed bid auction. The usual first price sealed bid auction and the Dutch auction are strategically equivalent. However, this equivalence breaks down in case information is acquired during the auction.

Valistus suomalaisessa kirjakulttuurissa 1700-luvulla

The dissertation discusses the history of the book and the Enlightenment in Finland by studying the reception and diffusion of eighteenth-century books and by approaching the discourse on the Enlightenment in Finnish source material. The methods used relate to historian Robert Darnton s studies on eighteenth-century print culture and his analyses of the relations between print culture and society. The study is based on diverse eighteenth-century sources: books, pamphlets and dissertations, bibliographies, book auction protocols, parliamentary documents, estate inventory deeds, newspapers, letters, lectures, memoirs and commonplace books. By the end of the eighteenth century, book production had increased and secular literature had begun to challenge the dominance of religious literature. The books of the Enlightenment belonged to the new literature that found its way into Finnish book collections previously dominated by religious literature. Enlightenment literature is not a set selection of books but rather diverse works from different genres. Thus the study introduces a variety of printed material, from philosophical tracts and textbooks to novels and pornography. In the case of books of the Enlightenment, the works of French Voltaire and German Christian Wolff were among the most widely read and circulated books in Finland. First and foremost, the Enlightenment was an era of intellectual debate. These debates carried strong criticism of the prevailing systems of thought. Enlightenment ideas challenged the Lutheran society of Sweden and especially its sense of conformity. Contemporaries saw many of the books of the Enlightenment as vessels of new ideas and criticism. Furthermore, this kind of print material was interpreted as being dangerous for uneducated readers. Belonging to a certain estate and social class had a major impact on individuals reading habits and their acquisition of books. One specific social group stands out in the Finnish source material: the officers at the Sveaborg naval fortress possessed and distributed Enlightenment books more than the members of any other social class. Other essential social groups were scholars, the nobility and the clergy, who took part in debates concerning the ideas and benefits of the Enlightenment. In the Finnish debates at the time, the concept of Enlightenment involved three primary notions. Firstly, it referred to the French philosophers, les philosophes, and to their works as well as to the social changes that took place during the French revolution. It also carried the idea of philosophical light or the light of reason, in a sense similar to Immanuel Kant s writings. Most importantly, it referred to a belief in progress and to a trust in true knowledge that would supercede ignorance and fanaticism. Hence, it is impossible to speak about the Enlightenment era in the Swedish realm without such concepts as reason, benefit or progress. These concepts likewise marked the books of the Enlightenment in eighteenth-century Finland.