Information Acquisitiion and Welfare

We study information acquisition in a exible framework with strategic complementarity or substitutability in actions and a rich set of externalities that are responsible for possible wedges between the equilibrium and the effcient acquisition of information. First, we relate the(in)effciency in the acquisition of information to the (in)effciency in the use of information and explain why effciency in the use does not guarantee effciency in the acquisition. Next, we show how the acquisition of private information affects the social value of public information (i.e., the comparative statics of equilibrium welfare with respect to the quality of public information). Finally, we illustrate the implications of our results in a few applications that include beauty contests, monetary economies with price-setting complementarities, and economies with negative production externalities.