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  3. American Economic Review
  4. December 2013
  5. Dynamic Deception

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Dynamic Deception

  • Axel Anderson
  • Lones Smith
American Economic Review
vol. 103, no. 7, December 2013
(pp. 2811–47)
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Abstract

We characterize the unique equilibrium of a competitive continuous time game between a resource-constrained informed player and a sequence of rivals who partially observe his action intensity. Our game adds noisy monitoring and impatient players to Aumann and Maschler (1966), and also subsumes insider trading models. The intensity bound induces a novel strategic bias and serial mean reversion by uninformed players. We compute the duration of the informed player's informational edge. The uninformed player's value of information is concave if the intensity bound is large enough. Costly obfuscation by the informed player optimally rises in the public deception.

Citation

Anderson, Axel, and Lones Smith. 2013. "Dynamic Deception." American Economic Review, 103 (7): 2811–47. DOI: 10.1257/aer.103.7.2811

Additional Materials

JEL Classification

  • D82 Asymmetric and Private Information; Mechanism Design
  • D83 Search; Learning; Information and Knowledge; Communication; Belief
  • G14 Information and Market Efficiency; Event Studies; Insider Trading