Value of Information in Competitive Economies with Incomplete Markets
AbstractWe study the value of information in a competitive economy in which agents trade in asset markets to reallocate risk. We characterize the kinds of information that allow a welfare improvement when portfolios can be freely reallocated. We then compare competitive equilibria before and after a change in information. We show that generically, if markets are sufficiently incomplete, the welfare effects are completely arbitrary: there typically exist changes in information that make all agents better off or all agents worse off.
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Bibliographic InfoPaper provided by Financial Markets Group in its series FMG Discussion Papers with number dp658.
Date of creation: Aug 2010
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Other versions of this item:
- Rohit Rahi & Piero Gottardi, 2007. "Value of Information in Competitive Economies with Incomplete Markets," FMG Discussion Papers dp596, Financial Markets Group.
- Piero Gottardi & Rohit Rahi, 2007. "Value of Information in Competitive Economies with Incomplete Markets," Working Papers 2007_25, Department of Economics, University of Venice "Ca' Foscari".
- Piero Gottardi & Rohit Rahi, 2010. "Value of Information in Competitive Economies with Incomplete Markets," Economics Working Papers ECO2010/34, European University Institute.
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D60 - Microeconomics - - Welfare Economics - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
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