The Value of Public Information in a Two-Region Model

Olga Kuznetsova

HSE Working papers from National Research University Higher School of Economics

Abstract: Economic literature is far from having a consensus about the social value of public information. Nevertheless, most studies agree that strategic complementarity increases the weight of public signals in private actions. In our paper we show that this result is not general. In a two-region model we relax the autarky assumption, common to previous studies, and suppose that strategic complementarity is present both inside and between the regions. When strategic complementarity is strengthened, the agents redistribute increased weight of public information between the signals from different regions. If the weight of the domestic public signal is sufficiently high, an increase in strategic complementarity may lower it. In this paper we study the welfare properties of this information structure and show that transparency in our model may be detrimental only if strategic complementarity is weak. Furthermore, we compare equilibrium information policies with the social optimum and show that policymakers in small regions tend to be too transparent, while policymakers in large regions tend to be too opaque.

Keywords: strategic complementarity; information policy; public information (search for similar items in EconPapers)
JEL-codes: D82 E61 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2016
New Economics Papers: this item is included in nep-mac, nep-mic and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in WP BRP Series: Economics / EC, March 2016, pages 1-18

Downloads: (external link)
https://www.hse.ru/data/2016/03/21/1128192779/126EC2016.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:126/ec/2016

Access Statistics for this paper

More papers in HSE Working papers from National Research University Higher School of Economics
Bibliographic data for series maintained by Shamil Abdulaev () and Shamil Abdulaev ().