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Heterogeneous information quality; strategic complementarities and optimal policy design

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  • James, Jonathan G.
  • Lawler, Phillip
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    Abstract

    The beauty-contest framework of Morris and Shin (2002) is extended to allow sub-groups within the population of agents to differ in the quality (i.e. precision) of their private information. We discuss the inefficiency of the resulting model's equilibrium, and assess the relative effectiveness in remedying this inefficiency of: (i) a Pigouvian tax scheme; (ii) direct policy intervention by means of an instrument which can modify the state of the world. The disclosure-policy implications of each of these two policy approaches are also analyzed.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 83 (2012)
    Issue (Month): 3 ()
    Pages: 342-352

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    Handle: RePEc:eee:jeborg:v:83:y:2012:i:3:p:342-352

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    Web page: http://www.elsevier.com/locate/jebo

    Related research

    Keywords: Strategic complementarity; Public disclosure; Policy intervention;

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    References

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    1. Jonathan G. James & Phillip Lawler, 2012. "Strategic Complementarity, Stabilization Policy, and the Optimal Degree of Publicity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(4), pages 551-572, 06.
    2. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Harvard Institute of Economic Research Working Papers 1922, Harvard - Institute of Economic Research.
    3. Colombo, Luca & Femminis, Gianluca, 2008. "The social value of public information with costly information acquisition," Economics Letters, Elsevier, vol. 100(2), pages 196-199, August.
    4. Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, 04.
    5. Stephen Morris & Hyun Song Shin, 2006. "Optimal Communication," Levine's Bibliography 321307000000000236, UCLA Department of Economics.
    6. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-45, December.
    7. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    8. James, Jonathan G. & Lawler, Phillip, 2008. "Aggregate demand shocks, private signals and employment variability: Can better information be harmful?," Economics Letters, Elsevier, vol. 100(1), pages 101-104, July.
    9. George-Marios Angeletos & Alessandro Pavan, 2006. "Socially Optimal Coordination: Characterization and Policy Implications," Discussion Papers 1496, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Michael Woodford, 2001. "Inflation Stabilization and Welfare," NBER Working Papers 8071, National Bureau of Economic Research, Inc.
    11. Eijffinger, Sylvester C W & van der Cruijsen, Carin A B, 2007. "The Economic Impact of Central Bank Transparency: A Survey," CEPR Discussion Papers 6070, C.E.P.R. Discussion Papers.
    12. Jonathan G. James & Phillip Lawler, 2011. "Optimal Policy Intervention and the Social Value of Public Information," American Economic Review, American Economic Association, vol. 101(4), pages 1561-74, June.
    13. David P. Myatt & Chris Wallace, 2009. "Endogenous Information Acquisition in Coordination Games," Economics Series Working Papers 445, University of Oxford, Department of Economics.
    14. Lars E. O. Svensson, 2006. "Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con," American Economic Review, American Economic Association, vol. 96(1), pages 448-452, March.
    15. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, vol. 75(4), pages 1103-1142, 07.
    16. Mauro Roca, 2010. "Transparency and Monetary Policy with Imperfect Common Knowledge," IMF Working Papers 10/91, International Monetary Fund.
    17. Christopher D Carroll, 2002. "Macroeconomic Expectations of Households and Professional Forecasters," Economics Working Paper Archive 477, The Johns Hopkins University,Department of Economics.
    18. Jacob Wong, 2008. "Information acquisition, dissemination, and transparency of monetary policy," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 46-79, February.
    19. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
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