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Learning from private and public observations of othersʼ actions

Listed author(s):
  • Amador, Manuel
  • Weill, Pierre-Olivier

We study the diffusion of dispersed private information in a large economy, where agents learn from the actions of others through two channels: a public channel, such as equilibrium market prices, and a private channel, for example local interactions. We show that, when agents learn only from the public channel, an initial release of public information increases agentsʼ total knowledge at all times and increases welfare. When a private learning channel is present, this result is reversed: more initial public information reduces agents asymptotic knowledge by an amount in order of log(t) units of precision. When agents are sufficiently patient, this reduces welfare.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022053112000439
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 147 (2012)
Issue (Month): 3 ()
Pages: 910-940

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Handle: RePEc:eee:jetheo:v:147:y:2012:i:3:p:910-940
DOI: 10.1016/j.jet.2012.02.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  17. Katzman, Brett & Kennan, John & Wallace, Neil, 2003. "Output and price level effects of monetary uncertainty in a matching model," Journal of Economic Theory, Elsevier, vol. 108(2), pages 217-255, February.
  18. Vives, Xavier, 1997. "Learning from Others: A Welfare Analysis," Games and Economic Behavior, Elsevier, vol. 20(2), pages 177-200, August.
  19. Vives, X., 1990. "How Fast Do Rational Agents Learn?," UFAE and IAE Working Papers 135-90, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  20. Venkatesh Bala & Sanjeev Goyal, 1998. "Learning from Neighbours," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 595-621.
  21. Stephen Morris & Hyun Song Shin, 2005. "Central Bank Transparency and the Signal Value of Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 1-66.
  22. Araujo, Luis & Shevchenko, Andrei, 2006. "Price dispersion, information and learning," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1197-1223, September.
  23. Araujo, Luis & Camargo, Braz, 2006. "Information, learning, and the stability of fiat money," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1571-1591, October.
  24. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-141, February.
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