IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Endogenous Public Information and Welfare

  • Vives, Xavier

This paper performs a welfare analysis of economies with private information when public information is endogenously generated and agents can condition on noisy public statistics in the rational expectations tradition. We find that equilibrium is not (restricted) efficient even when feasible allocations share similar properties to the market context (e.g., linear in information). The reason is that the market in general does not internalize the informational externality when public statistics (e.g., prices) convey information. Under strategic substitutability, equilibrium prices will tend to convey too little information when the "informational" role of prices prevails over its "index of scarcity" role and too much information in the opposite case. Under strategic complementarity, prices always convey too little information. These results extend to the internal efficiency benchmark (accounting only for the collective welfare of the active players). However, received results--on the relative weights placed by agents on private and public information, when the latter is exogenous--may be overturned.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8437
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8437.

as
in new window

Length:
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:cpr:ceprdp:8437
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Roberto Burguet & Xavier Vives, 2000. "Social learning and costly information acquisition," Economic Theory, Springer, vol. 15(1), pages 185-205.
  2. Vives, X., 1993. "Learning from Others," UFAE and IAE Working Papers 206.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Alessandro Pavan & George-Marios Angeletos, 2008. "Policy with Dispersed Information," 2008 Meeting Papers 1103, Society for Economic Dynamics.
  4. Gerard Gennotte and Hayne Leland., 1989. "Market Liquidity, Hedging and Crashes," Research Program in Finance Working Papers RPF-184, University of California at Berkeley.
  5. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-78, May.
  6. Xavier Vives, 2009. "Strategic Supply Function Competition with Private Information," Cowles Foundation Discussion Papers 1736, Cowles Foundation for Research in Economics, Yale University.
  7. Amador, Manuel & Weill, Pierre-Olivier, 2006. "Learning from Private and Public Observation of Other's Actions," MPRA Paper 109, University Library of Munich, Germany.
  8. 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).
  9. Hu, Haiyan & Jasper, Cynthia R., 2007. "A cross-cultural examination of the effects of social perception styles on store image formation," Journal of Business Research, Elsevier, vol. 60(3), pages 222-230, March.
  10. Manuel Amador & Pierre-Olivier Weill, 2008. "Learning from Prices: Public Communication and Welfare," NBER Working Papers 14255, National Bureau of Economic Research, Inc.
  11. Evans, Richard W. & Hu, Yingyao & Zhao, Zhong, 2007. "The Fertility Effect of Catastrophe: U.S. Hurricane Births," IZA Discussion Papers 2975, Institute for the Study of Labor (IZA).
  12. Vives, Xavier, 1997. "Learning from Others: A Welfare Analysis," Games and Economic Behavior, Elsevier, vol. 20(2), pages 177-200, August.
  13. 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.
  14. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  15. Ma, Fusheng & Kang, Shaozhong & Li, Fusheng & Zhang, Jianhua & Du, Taisheng & Hu, Xiaotao & Wang, Mixia, 2007. "Effect of water deficit in different growth stages on stem sap flux of greenhouse grown pear-jujube tree," Agricultural Water Management, Elsevier, vol. 90(3), pages 190-196, June.
  16. Christian Hellwig & Laura Veldkamp, 2006. "Knowing what others Know: Coordination motives in information acquisition," 2006 Meeting Papers 361, Society for Economic Dynamics.
  17. Wilson, Charles A, 1979. "Equilibrium and Adverse Selection," American Economic Review, American Economic Association, vol. 69(2), pages 313-17, May.
  18. Jian Wu & Min Gu & Lili Zhang & Yao Yu & Xin Chen & Tong B. Tang, 2007. "EFFECTS OF ANNEALING AND Ar INTERCALATION ON GLASS TRANSITION IN C60 FILMS," Surface Review and Letters (SRL), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 601-606.
  19. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  20. Vives, Xavier, 1988. "Aggregation of Information in Large Cournot Markets," Econometrica, Econometric Society, vol. 56(4), pages 851-76, July.
  21. Christian Ewerhart & Nuno Cassola & Natacha Valla, 2007. "Declining Valuations And Equilibrium Bidding In Central Bank Refinancing Operations," Swiss Finance Institute Research Paper Series 07-22, Swiss Finance Institute.
  22. Rodriguez Mora, Jose V. & Schulstad, Paul, 2007. "The effect of GNP announcements on fluctuations of GNP growth," European Economic Review, Elsevier, vol. 51(8), pages 1922-1940, November.
  23. Yunfen Bai & Xinhua Hu & Zhongxing Ye, 2007. "A Model for Counterparty Risk with Geometric Attenuation Effect and the Valuation of CDS," Papers 0706.3331, arXiv.org.
  24. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  25. Juha Siikamäki & David F. Layton, 2007. "Potential Cost-Effectiveness of Incentive Payment Programs for the Protection of Non-Industrial Private Forests," Land Economics, University of Wisconsin Press, vol. 83(4), pages 539-560.
  26. Laffont, Jean-Jacques M, 1985. "On the Welfare Analysis of Rational Expectations Equilibria with Asymmetric Information," Econometrica, Econometric Society, vol. 53(1), pages 1-29, January.
  27. Chu, Angus C., 2007. "Economic Growth and Patent Policy: Quantifying the Effects of Patent Length on R&D and Consumption," MPRA Paper 5476, University Library of Munich, Germany.
  28. Kiang, Melody Y. & Hu, Michael Y. & Fisher, Dorothy M., 2007. "The effect of sample size on the extended self-organizing map network--A market segmentation application," Computational Statistics & Data Analysis, Elsevier, vol. 51(12), pages 5940-5948, August.
  29. Yanxia Ding & Guangda Hu & Suhua Fan, 2007. "EFFECTS OF La DOPING ON FERROELECTRIC PROPERTIES OF CaBi4Ti4O15 THIN FILMS," Surface Review and Letters (SRL), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 277-281.
  30. Yunbi An & Ata Assaf & Jun Yang, 2007. "Hedging Volatility Risk: The Effectiveness Of Volatility Options," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 517-534.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8437. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.