Research goals

This project is about the role of information in economic interactions. In many situations, in which two or more parties try to reach an agreement, like regarding a trade, there are not only differences between the interests of those involved, but also between their information. For example a seller and a buyer have opposite goals for determining the price. But how strongly these are pronounced, i.e., how much a buyer is maximally willing to pay or which further opportunities for a sale the seller expects, depends on the own information as well as that of the respective opponent. The seller usually knows the objective qualities of the trade good better, but does not know exactly which of these the buyer particularly appreciates or rather not. Both sides then have an interest to obtain information from the other, but they do not freely reveal theirs for strategic reasons. This observation applies also in many other situations, for instance when a joint project is to be realized and the question arises how much each member of the group contributes or what the realization should be in detail. The exchange of information is thus an essential part of every agreement.

The meaning of unequally distributed information for the possibilities to reach agreements is well known within Microeconomics. When such situations are represented by mathematical models, it is possible to make clear predictions based on logical reasoning as to how far differing information can influence the result of a negotiation process. However, there are considerable differences between such models and hence the assumptions that are postulated. Some results are very abstract and widely valid, whereas others are quite special and only applicable under particular circumstances. The approach in this project aims at an intermediate level, to better understand the background of the often contrary results and to obtain new insights that are more systematic and have a more general applicability. For this goal, certain structural assumptions will be made regarding the interests of the involved parties and their information. These will be sufficiently general, however, to cover significantly more than specific examples. Correspondingly, new methods will be developed and applied for the analysis of these models.

The central aspect for the investigation will be the complexity of the relevant information, in particular if it is multi- or one-dimensional. Sometimes it can be measured on a single scale, like a willingness to pay or an important performance figure. Many times, however, several factors are relevant and the scientific insights for this case are still quite scattered. This project is going to contribute to a more systematic and complete view.