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VALUE OF INFORMATION IN COMPETITIVE ECONOMIES WITH INCOMPLETE MARKETS
Author(s) -
GOTTARDI PIERO,
RAHI ROHIT
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12041
Subject(s) - social planner , microeconomics , economics , asset (computer security) , competitive equilibrium , value (mathematics) , value of information , incomplete markets , complete market , complete information , pareto optimal , welfare , planner , pareto principle , contrast (vision) , market economy , mathematical economics , computer science , multi objective optimization , operations management , computer security , machine learning , artificial intelligence , programming language
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.