Value of information in competitive economies with incomplete markets
Title: Value of information in competitive economies with incomplete markets
Citation: International Economic Review, 2014, Vol. 55, No. 1, pp. 57–81
ISSN: 0020-6598; 1468-2354
We study the value of public information in competitive economies with incomplete markets. We show that generically the welfare effect of a change in the information available prior to trading can be in any direction : There exist changes in information that make all agents better off and changes for which all agents are worse off. In contrast, for any change in information, a Pareto improvement is feasible, that is, attainable by a planner facing the same informational and asset market constraints as agents. In this sense, the response of competitive markets to changes in information is typically not socially optimal.
Initial version: http://hdl.handle.net/1814/14440
Version: Published version of EUI ECO WP 2010/34
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