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Socially Optimal Coordination: Characterization and Policy Implications

Listed author(s):
  • George-Marios Angeletos
  • Alessandro Pavan

In recent years there has been a growing interest in macro models with heterogeneity in information and complementarity in actions. These models deliver promising positive properties, such as heightened inertia and volatility. But they also raise important normative questions, such as whether the heightened inertia and volatility are socially undesirable, whether there is room for policies that correct the way agents use information in equilibrium, and what are the welfare effects of the information disseminated by the media or policy makers. We argue that a key to answering all these questions is the relation between the equilibrium and the socially optimal degrees of coordination. The former summarizes the private value from aligning individual decisions, whereas the latter summarizes the value that society assigns to such an alignment once all externalities are internalized.

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File URL: http://faculty.wcas.northwestern.edu/~apa522/DMC.pdf
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1496.

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Date of creation: Sep 2006
Handle: RePEc:nwu:cmsems:1496
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Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014

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  1. Stephen Coate & Marco Battaglini, 2004. "Pareto Efficient Income Taxation with Stochastic Abilities," 2004 Meeting Papers 140, Society for Economic Dynamics.
  2. Christopher Phelan & Robert M Townsend, 2010. "Computing Multi-Period, Information Constrained Optima," Levine's Working Paper Archive 117, David K. Levine.
  3. Geore-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," Levine's Bibliography 122247000000000289, UCLA Department of Economics.
  4. Edmans, Alex & Gabaix, Xavier, 2009. "Tractability in Incentive Contracting," CEPR Discussion Papers 7578, C.E.P.R. Discussion Papers.
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  7. Alessandro Pavan & Ilya Segal & Juuso Toikka, 2009. "Dynamic Mechanism Design: Incentive Compatibility, Profit Maximization and Information Disclosure," Discussion Papers 1501, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. N. Gregory Mankiw & Ricardo Reis, 2007. "Sticky Information in General Equilibrium," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 603-613, 04-05.
  9. Ivan Werning & Emmanuel Farhi, 2010. "Insurance and Taxation over the Life Cycle," 2010 Meeting Papers 909, Society for Economic Dynamics.
  10. Marco Battaglini, 2003. "Long-Term Contracting with Markovian Consumers," Theory workshop papers 505798000000000048, UCLA Department of Economics.
  11. Christian Hellwig, 2004. "Heterogeneous Information and the Benefits of Public Information Disclosures (October 2005)," UCLA Economics Online Papers 283, UCLA Department of Economics.
  12. Mauro F Roca, 2010. "Transparency and Monetary Policy with Imperfect Common Knowledge," IMF Working Papers 10/91, International Monetary Fund.
  13. Stefania Albanesi & Christopher Sleet, 2004. "Dynamic optimal taxation with private information," Discussion Paper / Institute for Empirical Macroeconomics 140, Federal Reserve Bank of Minneapolis.
  14. Edmans, Alex & Gabaix, Xavier & Sadzik, Tomasz & Sannikov, Yuliy, 2009. "Dynamic Incentive Accounts," CEPR Discussion Papers 7497, C.E.P.R. Discussion Papers.
  15. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
  16. 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.
  17. Daniel F. Garrett & Alessandro Pavan, 2012. "Managerial Turnover in a Changing World," Journal of Political Economy, University of Chicago Press, vol. 120(5), pages 879-925.
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  19. Stephen E. Spear & Sanjay Srivastava, 1987. "On Repeated Moral Hazard with Discounting," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 599-617.
  20. Stephen Morris & Hyun Song Shin, 2007. "Optimal Communication," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 594-602, 04-05.
  21. repec:adr:anecst:y:1990:i:18:p:07 is not listed on IDEAS
  22. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
  23. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
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