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Value of information in competitive economies with incomplete markets

Gottardi, Piero and Rahi, Rohit (2014) Value of information in competitive economies with incomplete markets. International Economic Review, 55 (1). pp. 57-81. ISSN 0020-6598

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Abstract

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.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/%28...
Additional Information: © 2014 Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
Z Bibliography. Library Science. Information Resources > ZA Information resources
Sets: Departments > Finance
Research centres and groups > Financial Markets Group (FMG)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 21 Feb 2014 11:18
URL: http://eprints.lse.ac.uk/55801/

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