Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/84985
Authors: 
Gizatulina, Alia
Year of Publication: 
2013
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods 2013/8
Abstract: 
This paper studies the social value of public information in environments without common knowledge of the data-generating process. We show that the stronger the coordination motive behind agents' behaviour is, the more they use private or public signals in the way that they suspect others are doing it. Consequently, the negative impact of public communication noted by Morris and Shin (2002) can be amplified if agents suspect that others take the public signal too literally and/or are too inattentive to their private signals. Social welfare, if measured as in Morris and Shin (2002), always increases in the precision of the public signal when each agent evaluates its precision correctly, but believes that others did not understand the public signal at all, which suggests that there is a scope to obliterate public communication in a specific way, by making it, e.g., sophisticated and technical. By contrast, measuring welfare as in Woodford (2005) reverses, in general, desirability for such obliteration and non-commonality of signals' understanding.
Subjects: 
transparency
central bank communication
common p-belief
coordination game
higher-order uncertainty
JEL: 
D82
E58
Document Type: 
Working Paper

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