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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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    File URL: http://www.sciencedirect.com/science/article/pii/S0167268112001357
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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
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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    1. Michael Woodford, 2001. "Inflation Stabilization and Welfare," NBER Working Papers 8071, National Bureau of Economic Research, Inc.
    2. George-Marios Angeletos & Alessandro Pavan, 2006. "Socially Optimal Coordination: Characterization and Policy Implications," Discussion Papers 1496, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob de Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," DNB Working Papers 170, Netherlands Central Bank, Research Department.
    4. 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.
    5. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    6. Stephen Morris & Hyun Song Shin, 2006. "Optimal Communication," Levine's Bibliography 321307000000000236, UCLA Department of Economics.
    7. 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.
    8. 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.
    9. 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.
    10. van der Cruijsen, C.A.B. & Eijffinger, S.C.W., 2007. "The Economic Impact of Central Bank Transparency : A Survey," Discussion Paper 2007-06, Tilburg University, Center for Economic Research.
    11. Camille Cornand & Frank Heinemann, 2004. "Optimal Degree of Public Information Dissemination," CESifo Working Paper Series 1353, CESifo Group Munich.
    12. Colombo, Luca & Femminis, Gianluca, 2008. "The social value of public information with costly information acquisition," Economics Letters, Elsevier, vol. 100(2), pages 196-199, August.
    13. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
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    15. David P. Myatt & Chris Wallace, 2012. "Endogenous Information Acquisition in Coordination Games," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 340-374.
    16. 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.
    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. Mauro Roca, 2010. "Transparency and Monetary Policy with Imperfect Common Knowledge," IMF Working Papers 10/91, International Monetary Fund.
    19. 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.
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