Efficient use of information and social value of information

Arbeitspapier

This paper analyzes equlibrium and welfare for a tractable class of economies (games) with externalities, strategic complementarity or substitutability, and heterogenous information. First, we characterize the equilibrium use of information; complementarity heightens the sensitivity of equilibrium actions to public information, raising aggregate volatility, whereas substitutability heightens the sensitivity to private information, cross-sectional dispersion. Next, we define and characterize an efficiency benchmark designed to address whether the equilibrium use of information is optimal from a social perspective; the efficient use of information reflects the social value of aligning choices across agents. Finally, we examine the comparative statics of equilibrium welfare with respect to the information structure; the social value of information is best understood by classifying economies according to the inefficiency, if any, in the equilibrium use of information. We conclude with a few applications, including production externalities, beauty contests, business cycles, and large Cournot and Bertrand games.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 1413

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Externalities ; Asymmetric and Private Information; Mechanism Design
• Subject: incomplete information ; coordination ; complementarities ; externalities ; amplification ; efficiency ; Informationsökonomik ; Spieltheorie ; Informationswert ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Angeletos, George-Marios ; Pavan, Alessandro
• Event: Veröffentlichung
• (who): Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
• (where): Evanston, IL
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/31194
• Last update: 10.03.2025, 11:43 AM CET