Optimal and Robust Disclosure of Public Information

Takashi Ui
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Takashi Ui: Hitotsubashi University

No 39, Working Papers on Central Bank Communication from University of Tokyo, Graduate School of Economics

Abstract: A policymaker discloses public information to interacting agents who also acquire costly private information. More precise public information reduces the precision and cost of acquired private information. Considering this effect, what disclosure rule should the policymaker adopt? We address this question under two alternative assumptions using a linear-quadratic-Gaussian game with arbitrary quadratic material welfare and convex information costs. First, the policymaker knows the cost of private information and adopts an optimal disclosure rule to maximize the expected welfare. Second, the policymaker is uncertain about the cost and adopts a robust disclosure rule to maximize the worst-case welfare. Depending on the elasticity of marginal cost, an optimal rule is qualitatively the same as in the case of either a linear information cost or exogenous private information. The worst-case welfare is strictly increasing if and only if full disclosure is optimal under some information costs, which provides a new rationale for central bank transparency.

Keywords: private information; crowding-out effect; linear-quadratic- Gaussian game; optimal disclosure; robust disclosure; information design; information acquisition. (search for similar items in EconPapers)
JEL-codes: C72 D82 E10 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2022-03
New Economics Papers: this item is included in nep-gth, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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