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The Economics of Rumours

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Author Info
Banerjee, Abhijit V
Abstract

This paper studies a class of information transmission processes called rumors. The distinctive features of these processes are that the information transmission takes place in such a way that the recipient does not quite know whether or not to believe the information and that the probability that someone receives the information depends on how many people already have it. Counter-intuitive comparative statics results are obtained. For example, more information and higher productivity may reduce welfare, while changing the speed with which the rumor spreads has no welfare effect. Copyright 1993 by The Review of Economic Studies Limited.

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Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 60 (1993)
Issue (Month): 2 (April)
Pages: 309-27
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Handle: RePEc:bla:restud:v:60:y:1993:i:2:p:309-27

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