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The Social Value of Public Information with Costly Information Acquisition

  • Luca Colombo

    ()

    (DISCE, Università Cattolica)

  • Gianluca Femminis

    ()

    (DISCE, Università Cattolica)

In a beauty contest framework, we show that more precise public information contributes to higher welfare when the precision of private information is endogenous. We consider a Stackelberg game in which public authorities decide the accuracy of public information taking into account how this affects the acquisition of private information and the choice of individual actions in equilibrium. Because the acquisition of private information is costly, an increase in the precision of public information increases welfare by reducing the incentives for acquisition of private information, thereby inducing socially valuable savings of private resources.

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File URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0073.pdf
File Function: First version, 2006
Download Restriction: no

Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0073.

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Length: nn pages 16
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:ctc:serie3:ief0073
Contact details of provider: Web page: http://www.unicatt.it/Istituti/EconomiaFinanza
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  1. George-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," American Economic Review, American Economic Association, vol. 94(2), pages 91-98, May.
  2. Christian Hellwig & Laura Veldkamp, 2009. "Knowing What Others Know: Coordination Motives in Information Acquisition," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 223-251.
  3. Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, 04.
  4. 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.
  5. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  6. Lars E. O. Svensson, 2006. "Social Value of Public Information: Comment: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con," American Economic Review, American Economic Association, vol. 96(1), pages 448-452, March.
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