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Heterogeneous information quality; strategic complementarities and optimal policy design

  • James, Jonathan G.
  • Lawler, Phillip
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    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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    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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    1. George-Marios Angeletos & Alessandro Pavan, 2007. "Socially Optimal Coordination: Characterization and Policy Implications," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 585-593, 04-05.
    2. Blinder, Alan S. & Ehrmann, Michael & de Haan, Jakob & Fratzscher, Marcel & Jansen, David-Jan, 2008. "Central Bank communication and monetary policy: a survey of theory and evidence," Working Paper Series 0898, European Central Bank.
    3. David P. Myatt & Chris Wallace, 2009. "Endogenous Information Acquisition in Coordination Games," Economics Series Working Papers 445, University of Oxford, Department of Economics.
    4. 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.
    5. Stephen Morris & Hyun Song Shin, 2006. "Optimal Communication," Levine's Bibliography 321307000000000236, UCLA Department of Economics.
    6. Cornand, Camille & Heinemann, Frank, 2006. "Optimal Degree of Public Information Dissemination," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 158, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    7. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1295-1328, November.
    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. Luca Colombo & Gianluca Femminis, 2007. "The Social Value of Public Information with Costly Information Acquisition," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0073, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    10. Woodford Michael, 2002. "Inflation Stabilization and Welfare," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-53, February.
    11. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    12. 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.
    13. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
    14. 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.
    15. 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.
    16. 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.
    17. Christopher D. Carroll, 2003. "Macroeconomic Expectations Of Households And Professional Forecasters," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 269-298, February.
    18. 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.
    19. Mauro Roca, 2010. "Transparency and Monetary Policy with Imperfect Common Knowledge," IMF Working Papers 10/91, International Monetary Fund.
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