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Socially Optimal Coordination: Characterization and Policy Implications

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  • George-Marios Angeletos
  • Alessandro Pavan

Abstract

In recent years there has been a growing interest in macro models with heterogeneity in information and complementarity in actions. These models deliver promising positive properties, such as heightened inertia and volatility. But they also raise importantnormative questions, such as whether the heightened inertia and volatility are socially undesirable, whether there is room for policies that correct the way agents use information in equilibrium, and what are the welfare effects of the information disseminated by the media or policy makers. We argue that a key to answering all these questions is the relation between the equilibrium and the socially optimal degrees of coordination. The former summarizes the private value from aligning individual decisions, whereas the latter summarizes the value that society assigns to such an alignment once all externalities are internalized. (JEL: C72, D62, D82) (c) 2007 by the European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 5 (2007)
Issue (Month): 2-3 (04-05)
Pages: 585-593

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Handle: RePEc:tpr:jeurec:v:5:y:2007:i:2-3:p:585-593

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Cited by:
  1. Paul A. Grout & Sebastien Mitraille & Silvia Sonderegger, 2008. "The Costs and Benefits of "Strangers": Why Mixed Communities Are Better," The Centre for Market and Public Organisation 08/191, Department of Economics, University of Bristol, UK.
  2. George-Marios Angeletos & Alessandro Pavan, 2008. "Policy with Dispersed Information," Carlo Alberto Notebooks 86, Collegio Carlo Alberto.
  3. Camille Cornand & Frank Heinemann, 2014. "Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities," Working Papers halshs-00925018, HAL.
  4. James, Jonathan G. & Lawler, Phillip, 2012. "Heterogeneous information quality; strategic complementarities and optimal policy design," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 342-352.
  5. Huang, Weiting, 2009. "作为人力资本的语言:专业化、组织沟通与语言习得
    [Language as Human Capital: Labor Specialization, Organizational Communication and Language Acquisition]
    ," MPRA Paper 15677, University Library of Munich, Germany.
  6. Baeriswyl, Romain & Cornand, Camille, 2007. "Monetary policy and its informative value," Proceedings, Federal Reserve Bank of San Francisco, issue March, pages 1-34.
  7. 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.

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