Rahi, Rohit 
ORCID: 0000-0001-6887-9160 and Zigrand, Jean-Pierre ORCID: 0000-0002-7784-4231
(2018)
Information acquisition, price informativeness, and welfare.
Journal of Economic Theory, 177.
pp. 558-593.
ISSN 1095-7235
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Abstract
We consider the market for a risky asset with heterogeneous valuations. Private information that agents have about their own valuation is reflected in the equilibrium price. We study the learning externalities that arise in this setting, and in particular their implications for price informativeness and welfare. When private signals are noisy, so that agents rely more on the information conveyed by prices, discouraging information gathering may be Pareto improving. Complementarities in information acquisition can lead to multiple equilibria.
| Item Type: | Article |
|---|---|
| Official URL: | https://www.sciencedirect.com/journal/journal-of-e... |
| Additional Information: | © 2018 The Authors |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| JEL classification: | D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies |
| Date Deposited: | 23 Jul 2018 08:57 |
| Last Modified: | 01 Apr 2024 08:10 |
| Projects: | ES/K002309/1 |
| Funders: | Economic and Social Research Council |
| URI: | http://eprints.lse.ac.uk/id/eprint/89385 |
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