The social value of strategic public information

We study the welfare effects of strategically using public information when the provider’s information quality is unobservable. Our model features a benevolent public authority that privately observes her information quality and strategically chooses whether to provide public information to private-sector agents in a beauty-contest game à la Morris and Shin (2002). We show that the authority’s equilibrium strategy hinges on her expected information advantage relative to private-sector agents. When the advantage is either small or large, the authority pools across qualities, and with risk-averse agents, the added uncertainty regarding quality lowers welfare relative to a benchmark without such uncertainty. When the information advantage is intermediate, a separating equilibrium emerges: the high-quality authority provides public information, while the low-quality authority withholds it. In this case, the strategic use of public information enhances welfare by channeling superior information into decisions while limiting overreaction to weak information. By delineating these regimes, we clarify when the social value of strategic public information is beneficial versus detrimental, offering guidance for public communication policies.