TY - JOUR
T1 - Information Acquisition and Welfare
AU - Colombo, Luca Vittorio Angelo
AU - Femminis, Gianluca
AU - Pavan, Alessandro
PY - 2014
Y1 - 2014
N2 - We study information acquisition in a flexible 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 efficient acquisition of information. First, we relate the (in)efficiency in the acquisition of information to the (in)efficiency in the use of information and explain why efficiency in the use is no guarantee of efficiency 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 the results in a monetary economy with price rigidities and dispersed information about productivity shocks.
AB - We study information acquisition in a flexible 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 efficient acquisition of information. First, we relate the (in)efficiency in the acquisition of information to the (in)efficiency in the use of information and explain why efficiency in the use is no guarantee of efficiency 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 the results in a monetary economy with price rigidities and dispersed information about productivity shocks.
KW - Efficiency
KW - Endogenous information
KW - Externalities
KW - Price-setting complementarities
KW - Strategic complementarity/substitutability
KW - Welfare
KW - Efficiency
KW - Endogenous information
KW - Externalities
KW - Price-setting complementarities
KW - Strategic complementarity/substitutability
KW - Welfare
UR - http://hdl.handle.net/10807/56718
U2 - 10.1093/restud/rdu015
DO - 10.1093/restud/rdu015
M3 - Article
SN - 0034-6527
SP - 1438
EP - 1483
JO - Review of Economic Studies
JF - Review of Economic Studies
ER -