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Speculative trade and the value of public information
Author(s) -
Galanis Spyros
Publication year - 2021
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12476
Subject(s) - ambiguity , consequentialism , economics , value of information , value (mathematics) , microeconomics , consistency (knowledge bases) , arrow , intrinsic value (animal ethics) , public information , aggregate (composite) , ambiguity aversion , mathematical economics , computer science , philosophy , materials science , internet privacy , machine learning , artificial intelligence , environmental ethics , political science , law , composite material , programming language
In environments with expected utility, it has long been established that speculative trade cannot occur and that the value of public information is negative in economies with risk‐sharing and no aggregate uncertainty. We show that these results are still true even if we relax expected utility, so that either Dynamic Consistency (DC) or Consequentialism is violated. We characterize no speculative trade in terms of a weakening of DC and find that Consequentialism is not required. Moreover, we show that a weakening of both DC and Consequentialism is sufficient for the value of public information to be negative. We therefore generalize these important results for convex preferences which contain several classes of ambiguity averse preferences.