The Value of Public Information in a Two-Region Model

18 Pages Posted: 21 Mar 2016

See all articles by Olga Kuznetsova

Olga Kuznetsova

National Research University Higher School of Economics

Date Written: March 21, 2016

Abstract

Economic literature is far from having a consensus about the social value of public information. Nevertheless, most studies agree that strategic complementarity increases the weight of public signals in private actions. In our paper we show that this result is not general. In a two-region model we relax the autarky assumption, common to previous studies, and suppose that strategic complementarity is present both inside and between the regions. When strategic complementarity is strengthened, the agents redistribute increased weight of public information between the signals from different regions. If the weight of the domestic public signal is sufficiently high, an increase in strategic complementarity may lower it. In this paper we study the welfare properties of this information structure and show that transparency in our model may be detrimental only if strategic complementarity is weak. Furthermore, we compare equilibrium information policies with the social optimum and show that policymakers in small regions tend to be too transparent, while policymakers in large regions tend to be too opaque.

Keywords: strategic complementarity, information policy, public information

JEL Classification: D82, E61

Suggested Citation

Kuznetsova, Olga, The Value of Public Information in a Two-Region Model (March 21, 2016). Higher School of Economics Research Paper No. WP BRP 126/EC/2016, Available at SSRN: https://ssrn.com/abstract=2752451 or http://dx.doi.org/10.2139/ssrn.2752451

Olga Kuznetsova (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
37
Abstract Views
349
PlumX Metrics