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Information (in) Chains: information transmission through production chains

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  • Waldyr Areosa
  • Marta Areosa

Abstract

We study the transmission of information in a model with a vertical input-output structure and dispersed information. Firms observe input prices with noise that endogenize the precision of information that is public within a stage but not across stages. In contrast to the case with an exogenous and overall public signal, our main result is that agents may find it optimal to rely less on public information along the chain. A direct implication is that, while information precision remains unchanged with exogenous public signals (information chains), it may decrease along the chain when semi-public signals are endogenous (information in chains).

Suggested Citation

  • Waldyr Areosa & Marta Areosa, 2012. "Information (in) Chains: information transmission through production chains," Working Papers Series 286, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:286
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    References listed on IDEAS

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    Cited by:

    1. Bruno Martins, 2012. "Local Market Structure and Bank Competition: evidence from the Brazilian auto loan market," Working Papers Series 299, Central Bank of Brazil, Research Department.
    2. Waldyr Areosa & Marta Areosa, 2012. "The Signaling Effect of Exchange Rates: pass-through under dispersed information," Working Papers Series 282, Central Bank of Brazil, Research Department.
    3. Papadimitriou, Theophilos & Gogas, Periklis & Tabak, Benjamin M., 2013. "Complex networks and banking systems supervision," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4429-4434.

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