Public Disclosure and Private Information Acquisition: A Global Game Approach

72 Pages Posted: 31 Jul 2020 Last revised: 16 Sep 2021

See all articles by Zhifeng Cai

Zhifeng Cai

Rutgers, The State University of New Jersey - Camden College of Arts and Sciences

Feng Dong

Tsinghua University - School of Economics and Management

Date Written: June 20, 2020

Abstract

This paper studies the impacts of public information release in a class of models with strategic information acquisition. Due to the presence of strategic complementarity, multiple equilibria can arise, creating difficulty in analyzing comparative statics. We develop a methodology to apply global-game refinement in this setting and use it to study a model with a dynamic complementarity in information acquisition. The resulting unique equilibrium is shown to have a property that none of the underlying equilibria have: while in all the underlying equilibria public information always crowds out private information, in the global-game equilibrium public information can crowd in more private information acquisition. The crowding-in effect is more pronounced when fundamental uncertainty is high and reverts back to crowding out when uncertainty is low. Omitting this effect could lead the regulator to disclose too little public information especially in recessions, which are often associated with rising uncertainty.

Keywords: Information Disclosure; Information Acquisition; Dynamic Complementarity; Global Games

JEL Classification: D83; D84; E44; G14; G20.

Suggested Citation

Cai, Zhifeng and Dong, Feng, Public Disclosure and Private Information Acquisition: A Global Game Approach (June 20, 2020). Available at SSRN: https://ssrn.com/abstract=3631719 or http://dx.doi.org/10.2139/ssrn.3631719

Zhifeng Cai

Rutgers, The State University of New Jersey - Camden College of Arts and Sciences ( email )

Department of Economics
311 N. 5th St.
Camden, NJ 08102
United States

Feng Dong (Contact Author)

Tsinghua University - School of Economics and Management ( email )

School of Economics and Management
Tsinghua University
Beijing, Beijing 100084
China

HOME PAGE: http://fengdongecon.weebly.com

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