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Value of Information in Competitive Economies with Incomplete Markets

Author

Listed:
  • Rohit Rahi

  • Piero Gottardi

Abstract

A substantial literature addresses the negative effect on welfare of the release of information in a competitive market economy. We show that the value of information in this setting is typically positive if asset markets are sufficiently incomplete. More specifically, for any competitive equilibrium of a generic economy, we can find a finer information structure such that an allocation that is resource feasible and measurable with respect to thisinformation ex-post Pareto dominates the given equilibrium allocation.Journal of Economic Literature Classification Numbers: D52, D60, D80.Keywords: Competitive Equilibrium, Incomplete Markets, Value of Information.

Suggested Citation

  • Rohit Rahi & Piero Gottardi, 2007. "Value of Information in Competitive Economies with Incomplete Markets," FMG Discussion Papers dp596, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp596
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    2. Beker, Pablo F. & Cuevas, Conrado, "undated". "The social value of information in economies with mandatory savings," Economic Research Papers 269080, University of Warwick - Department of Economics.
    3. Rahi, Rohit, 2021. "Information acquisition with heterogeneous valuations," Journal of Economic Theory, Elsevier, vol. 191(C).
    4. Rahi, Rohit & Zigrand, Jean-Pierre, 2018. "Information acquisition, price informativeness, and welfare," Journal of Economic Theory, Elsevier, vol. 177(C), pages 558-593.
    5. Rahi, Rohit, 2019. "Information acquisition with heterogeneous valuations," LSE Research Online Documents on Economics 118929, London School of Economics and Political Science, LSE Library.
    6. Piero Gottardi & Rohit Rahi, 2013. "Risk sharing and retrading in incomplete markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(2), pages 287-304, October.
    7. Piotr Denderski & Christian Stoltenberg, 2015. "On Positive Value of Information in Risk Sharing," Tinbergen Institute Discussion Papers 15-074/VI, Tinbergen Institute.
    8. Cristian Ionescu, 2012. "Incomplete Markets and Financial Instability. The Role of Information," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 12(1), pages 141-150.
    9. Rahi, Rohit & Zigrand, Jean-Pierre, 2018. "Information acquisition, price informativeness and welfare," LSE Research Online Documents on Economics 118935, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

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    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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