The Social Value of Public Information with Costly Information Acquisition

Luca Colombo and Gianluca Femminis

No ief0073, DISCE - Quaderni dell'Istituto di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: In a beauty contest framework, we show that more precise public information contributes to higher welfare when the precision of private information is endogenous. We consider a Stackelberg game in which public authorities decide the accuracy of public information taking into account how this affects the acquisition of private information and the choice of individual actions in equilibrium. Because the acquisition of private information is costly, an increase in the precision of public information increases welfare by reducing the incentives for acquisition of private information, thereby inducing socially valuable savings of private resources.

Keywords: Public information; private information; coordination; welfare (search for similar items in EconPapers)
JEL-codes: C70 D82 E10 (search for similar items in EconPapers)
Pages: nn pages 16
Date: 2007-03
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: The social value of public information with costly information acquisition (2008)
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