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Optimal Degree of Public Information Dissemination

Author

Listed:
  • Camille Cornand
  • Frank Heinemann

Abstract

In currency exchange markets, there is a conflict between individual decisions and the socially optimal solution. Whereas agents have a coordination motive to take the same position, at the social level effective market coordination per se is not socially valuable, and the central bank aims at driving agents’ actions as close as possible to the economic fundamental state. Some studies argue that it might be better to withhold public information because its potential to serve as a focal point induces agents to exaggerate the importance of public announcements. This paper shows that public information should always be provided with maximum precision, but under certain condition not to all agents. Restrictions on the degree of publicity are a better instrument with which to prevent the negative welfare effects of public announcements than restrictions on their precision are. The optimal degree of publicity is always positive.

Suggested Citation

  • Camille Cornand & Frank Heinemann, 2004. "Optimal Degree of Public Information Dissemination," CESifo Working Paper Series 1353, CESifo.
  • Handle: RePEc:ces:ceswps:_1353
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    transparency; public information; private information; common p-beliefs; coordination; strategic complementarity;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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