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Optimal Degree of Public Information Dissemination

Listed author(s):
  • Camille Cornand

    (BETA - Bureau d'Economie Théorique et Appliquée - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - UL - Université de Lorraine)

  • Frank Heinemann

    (TUB - Technische Universität Berlin [Berlin])

Financial markets and macroeconomic environments are often characterised by positive externalities. In these environments, transparency may reduce expected welfare: public announcements serve as focal points for higher-order beliefs and affect agents' behaviour more than justified by their informational contents. Some scholars conclude that reducing public signals' precision or entirely withholding information may improve welfare. This article shows that public information should always be provided with maximum precision but, under certain conditions, not to all agents. Restricting the degree of publicity is a better-suited instrument for preventing the negative welfare effects of public announcements than restrictions on their precision are. Copyright © 2008 The Author(s).

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Paper provided by HAL in its series Post-Print with number halshs-00300211.

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Date of creation: 2008
Publication status: Published in The Economic Journal, 2008, 118 (avril), pp.718-742
Handle: RePEc:hal:journl:halshs-00300211
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00300211
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