Strong Dominance for Dynamic Signals

TL;DR

This paper extends the concept of signal representation to dynamic decision problems, providing a robust dominance criterion for comparing information structures in evolving contexts.

Contribution

It introduces a dynamic version of the reveal-or-refine condition, enabling comparison of information structures' value regardless of other information sources.

Findings

Robust dominance is equivalent to a dynamic reveal-or-refine condition.

The signal representation framework applies profitably to dynamic decision problems.

Provides a criterion for valuing information structures in evolving environments.

Abstract

In this paper, we reveal that the signal representation of information introduced by Gentzkow and Kamenica (2017) can be applied profitably to dynamic decision problems. We use this to characterize when one dynamic information structure is more valuable to an agent than another, irrespective of what other dynamic sources of information the agent may possess. Notably, this robust dominance is equivalent to an intuitive dynamic version of Brooks, Frankel, and Kamenica (2022)'s reveal-or-refine condition.