Testing Information Ordering for Strategic Agents

Abstract

Specifying the information structure in strategic environments is difficult for empirical researchers. We develop a test of information ordering that examines whether the true information structure is at least as informative as a proposed baseline. Using Bayes Correlated Equilibrium (BCE), we translate the ordering of information structures into testable moment inequalities and establish uniform asymptotic validity for our testing procedure. In an application to U.S. airline markets, we test whether hub airlines have informational advantages beyond cost and demand benefits. We reject the privileged information hypothesis, with rejections concentrated in large, competitive markets.