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Homotopies on Preferences under Asymmetric Information
Book chapter   Peer reviewed

Homotopies on Preferences under Asymmetric Information

Perspectives in Applied Mathematics, pp.91-115
Nova Publishers, Inc
2011
Handle:
https://hdl.handle.net/10863/52419

Abstract

The present paper provides a strategic dynamic analysis of a theoretical scenario where verifiable information is transmitted between an informed sender and an uninformed but rational decision maker in a multidimensional space. The information provided by the sender is assumed to be encoded in multifunctions. We show that each one of these multifunctions induces a preference relation on the decision maker. These induced preferences do not generally coincide with those defined in a complete information environment. We provide sufficient conditions for the utility functions induced by the information sender to be continuous. In addition, we use homotopy theory to illustrate how the information encoded by the sender in the multifunctions can be modified through time in a continuous way so as to induce any a priori assigned preference relation on the decision maker.

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