Value of Information in Competitive Economies with Incomplete Markets
Title: Value of Information in Competitive Economies with Incomplete Markets
Series/Report no.: EUI ECO; 2010/34
We study the value of information in a competitive economy in which agents trade in asset markets to reallocate risk. We characterize the kinds of information that allow a welfare improvement when portfolios can be freely reallocated. We then compare competitive equilibria before and after a change in information. We show that generically, if markets are sufficiently incomplete, the welfare effects are completely arbitrary: there typically exist changes in information that make all agents better off, or all agents worse off.
Subject: D52; D60; D80; Competitive Equilibrium; Incomplete Markets; Value of Information
Type of Access: openAccess
Final published version: http://hdl.handle.net/1814/33681