Template-Type: ReDIF-Paper 1.0
Author-Name: Luca Colombo
Author-X-Name-First: Luca
Author-X-Name-Last: Colombo
Author-Email: lucava.colombo@unicatt.it
Author-Workplace-Name: DISCE, Università Cattolica
Author-Name: Gianluca Femminis
Author-X-Name-First: Gianluca
Author-X-Name-Last: Femminis
Author-Email: gianluca.femminis@unicatt.it
Author-Workplace-Name: DISCE, Università Cattolica
Title: The Welfare Implications of Costly Information Provision
Abstract: We study information acquisition in a framework characterized by strategic
complementarity or substitutability. Agents’ actions are based on costly public
and private signals, the precisions of which are set by a policy maker and by
private agents, respectively. The policy maker – acting as a von Stackelberg leader
– takes into account that an increase in the precision of public information reduces
the incentives for private information acquisition. The precisions of both the public
and private information available to each agent are shown to depend crucially on the
degree of strategic complementarity or substitutability. We explore the welfare and
policy implications of our results in economies with beauty contests, price setting
complementarities, and negative externalities entailing strategic substitutability.
Length: 47
Creation-Date: 2011-01
File-URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0100.pdf
File-Format: Application/pdf
File-Function: First version, 2011
Number: ief0100
Classification-JEL: C72, D62, D83, E50
Keywords: Incomplete information, strategic complementarity, strategic substitutability,
welfare
Handle: RePEc:ctc:serie3:ief0100