Article2014

Information Acquisition and Welfare

Luca Vittorio Angelo Colombo · Gianluca Femminis

177 citations0/0 files storedThe Review of Economic Studies

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Economic theories and models Merger and Competition Analysis Game Theory and Applications

Abstract

We study information acquisition in a flexible framework with strategic complementarity or substitutability in actions and a rich set of externalities that are responsible for possible wedges between the equilibrium and the efficient acquisition of information. First, we relate the (in)efficiency in the acquisition of information to the (in)efficiency in the use of information and explain why efficiency in the use is no guarantee of efficiency in the acquisition. Next, we show how the acquisition of private information affects the social value of public information (i.e. the comparative statics of equilibrium welfare with respect to the quality of public information). Finally, we illustrate the implications of the results in a monetary economy with price rigidities and dispersed information about productivity shocks.

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References

2000Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles 2003Implications of rational inattention 1986On the private provision of public goods 2002Social Value of Public Information 2002Consumption Over the Life Cycle 1988Intertemporal Substitution in Consumption 1981Intertemporal Substitution in Consumption 1997Returns to Scale in U.S. Production: Estimates and Implications

Cited by

2017Endogenous Public Information and Welfare in Market Games 2015Information acquisition and learning from prices over the business cycle 2016Farmers' Information Management in Developing Countries—A Highly Asymmetric Information Structure 2014Public Communication and Information Acquisition 2020Acquiring Information through Peers 2017Short-sale constraints, information acquisition, and asset prices 2020Sentiments, strategic uncertainty, and information structures in coordination games

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