The Acquisition of Information in a Dynamic Market
Posted: 14 Sep 1999
This paper models the process of acquiring information in an intertemporal rational expectations framework. I find that when agents have control over the process of resolving uncertainty, the rational expectations equilibrium can differ dramatically from the equilibrium where agents are exogenously endowed with private information. I demonstrate that rational expectations equilibria do not generally exist in intertemporal economies in which the information acquisition process is endogenous. I also show that when intertemporal fully revealing rational expectations equilibria do exist, agents can pay a strictly positive amount for information. Finally, I show that it is possible for an equilibrium to exist in which agents choose to purchase information even if all agents, including the agents who purchased the information, are made strictly worse off by the purchase.
JEL Classification: D82, D83
Suggested Citation: Suggested Citation