We study the value of public information in competitive economies with incomplete markets. We show that generically the welfare effect of a change in the information available prior to trading can be in any direction: There exist changes in information that make all agents better off and changes for which all agents are worse off. In contrast, for any change in information, a Pareto improvement is feasible, that is, attainable by a planner facing the same informational and asset market constraints as agents. In this sense, the response of competitive markets to changes in information is typically not socially optimal. © (2014) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

VALUE OF INFORMATION IN COMPETITIVE ECONOMIES WITH INCOMPLETE MARKETS

GOTTARDI, Piero;
2014-01-01

Abstract

We study the value of public information in competitive economies with incomplete markets. We show that generically the welfare effect of a change in the information available prior to trading can be in any direction: There exist changes in information that make all agents better off and changes for which all agents are worse off. In contrast, for any change in information, a Pareto improvement is feasible, that is, attainable by a planner facing the same informational and asset market constraints as agents. In this sense, the response of competitive markets to changes in information is typically not socially optimal. © (2014) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
2014
55
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/44647
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