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Value of Information in Competitive Economies with Incomplete Markets

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Author Info
Piero Gottardi ()
Rohit Rahi (Departments of Economics and Finance, London School of Economics)

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Abstract

A substantial literature addresses the negative effect on welfare of the release of information in a competitive market economy. We show that the value of information in this setting is typically positive if asset markets are sufficiently incomplete. More specifically, for any competitive equilibrium of a generic economy, we can find a finer information structure such that an allocation that is resource feasible and measurable with respect to this information ex-post Pareto dominates the given equilibrium allocation.

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File URL: http://www.dse.unive.it/fileadmin/templates/dse/wp/WP_2007/WP_DSE_gottardi_rahi_25_07.pdf
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File Function: Revised version, 2007
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Publisher Info
Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number 2007_25.

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Length: 24
Date of creation: 2007
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Handle: RePEc:ven:wpaper:2007_25

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Related research
Keywords: Competitive Equilibrium Incomplete Markets Value of Information.

Other versions of this item:

Find related papers by JEL classification:
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
D60 - Microeconomics - - Welfare Economics - - - General
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bernhard Eckwert & Itzhak Zilcha, 2003. "Incomplete risk sharing arrangements and the value of information," Economic Theory, Springer, vol. 21(1), pages 43-58, 01. [Downloadable!] (restricted)
  2. Green, Jerry R, 1981. "Value of Information with Sequential Futures Markets," Econometrica, Econometric Society, vol. 49(2), pages 335-58, March. [Downloadable!] (restricted)
  3. Rohit Rahi & Piero Gottardi, 2001. "Efficiency Properties of Rational Expectations Equilibria with Asymmetric Information," FMG Discussion Papers dp381, Financial Markets Group. [Downloadable!] (restricted)
    Other versions:
  4. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April. [Downloadable!] (restricted)
  5. Edward E. Schlee, 2001. "The Value of Information in Efficient Risk-Sharing Arrangements," American Economic Review, American Economic Association, vol. 91(3), pages 509-524, June. [Downloadable!] (restricted)
  6. Eckwert, Bernhard & Zilcha, Itzhak, 2001. "The Value of Information in Production Economies," Journal of Economic Theory, Elsevier, vol. 100(1), pages 172-186, September. [Downloadable!] (restricted)
  7. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November. [Downloadable!] (restricted)
    Other versions:
  8. Campbell, Colin M., 2004. "Blackwell's ordering and public information," Journal of Economic Theory, Elsevier, vol. 114(2), pages 179-197, February. [Downloadable!] (restricted)
  9. Milne, Frank & Shefrin, H. M., 1987. "Information and securities: A note on pareto dominance and the second best," Journal of Economic Theory, Elsevier, vol. 43(2), pages 314-328, December. [Downloadable!] (restricted)
  10. Atsushi Kajii & Antonio Villanacci & Alessandro Citanna, 1998. "Constrained suboptimality in incomplete markets: a general approach and two applications," Economic Theory, Springer, vol. 11(3), pages 495-521. [Downloadable!] (restricted)
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This page was last updated on 2008-10-3.

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