Value of information in competitive economies with incomplete markets

Gottardi, Piero and Rahi, Rohit (2010) Value of information in competitive economies with incomplete markets. Financial Markets Group Discussion Papers (658). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

We study the value of information in a competitive economy in which agents trade in asset markets to reallocate risk. We characterize the kinds of information that allow a welfare improvement when portfolios can be freely reallocated. We then compare competitive equilibria before and after a change in information. We show that generically, if markets are sufficiently incomplete, the welfare effects are completely arbitrary: there typically exist changes in information that make all agents better off, or all agents worse off.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 2010 The Authors
Divisions:	Finance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D52 - Incomplete Markets D - Microeconomics > D6 - Welfare Economics > D60 - General D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General
Date Deposited:	04 Jul 2023 08:42
Last Modified:	08 May 2024 22:37
URI:	http://eprints.lse.ac.uk/id/eprint/119083

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