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Information Supply with a Linear Signalling Rule: A Note on Distorted Signals


  • Giovanna Nicodano


An informed agent - whose welfare depends on two state variables, s1 and s2 - chooses a linear signalling rule that translates his private signal into a public signal. Conditional on the public signal receivers, whose welfare depends on state 1 alone, take actions which affect the informed agent's pay-off. When strategies are linear, information distortion is sufficient to guarantee public information supply on state 1 even when there is a conflict of interest with respect to state 1. When endogenous, information distortion is the equilibrium outcome even when there is coincidence of interests with respect to state 1.

Suggested Citation

  • Giovanna Nicodano, 1990. "Information Supply with a Linear Signalling Rule: A Note on Distorted Signals," CEPR Financial Markets Paper 0009, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
  • Handle: RePEc:cpr:ceprfm:0009

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