EconStor >
Northwestern University >
Kellogg School of Management - Center for Mathematical Studies in Economics and Management Science, Northwestern University  >
Discussion Papers, Kellogg School of Management, Northwestern University >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/31194
  
Title:Efficient use of information and social value of information PDF Logo
Authors:Angeletos, George-Marios
Pavan, Alessandro
Issue Date:2006
Series/Report no.:Discussion paper // Center for Mathematical Studies in Economics and Management Science 1413
Abstract:This paper analyzes equlibrium and welfare for a tractable class of economies (games) with externalities, strategic complementarity or substitutability, and heterogenous information. First, we characterize the equilibrium use of information; complementarity heightens the sensitivity of equilibrium actions to public information, raising aggregate volatility, whereas substitutability heightens the sensitivity to private information, cross-sectional dispersion. Next, we define and characterize an efficiency benchmark designed to address whether the equilibrium use of information is optimal from a social perspective; the efficient use of information reflects the social value of aligning choices across agents. Finally, we examine the comparative statics of equilibrium welfare with respect to the information structure; the social value of information is best understood by classifying economies according to the inefficiency, if any, in the equilibrium use of information. We conclude with a few applications, including production externalities, beauty contests, business cycles, and large Cournot and Bertrand games.
Subjects:incomplete information
coordination
complementarities
externalities
amplification
efficiency
JEL:C72
D62
D82
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

Files in This Item:
File Description SizeFormat
587461845-AngeletosPavan-SVIC-Supplementary.pdfAppendix129.94 kBAdobe PDF
587461845.PDF321.15 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/31194

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.