Optimal Degree of Public Information Dissemination

22 Pages Posted: 21 Dec 2004

See all articles by Frank Heinemann

Frank Heinemann

Berlin Institute of Technology; CESifo (Center for Economic Studies and Ifo Institute)

Camille Cornand

Groupe d'Analyse et de Théorie Economique (GATE), CNRS, University of Lyon

Date Written: December 2004

Abstract

In currency exchange markets, there is a conflict between individual decisions and the socially optimal solution. Whereas agents have a coordination motive to take the same position, at the social level effective market coordination per se is not socially valuable, and the central bank aims at driving agents' actions as close as possible to the economic fundamental state. Some studies argue that it might be better to withhold public information because its potential to serve as a focal point induces agents to exaggerate the importance of public announcements. This paper shows that public information should always be provided with maximum precision, but under certain condition not to all agents. Restrictions on the degree of publicity are a better instrument with which to prevent the negative welfare effects of public announcements than restrictions on their precision are. The optimal degree of publicity is always positive.

Keywords: transparency, public information, private information, common p-beliefs,coordination, strategic complementarity

JEL Classification: C73, D82, F31

Suggested Citation

Heinemann, Frank and Cornand, Camille, Optimal Degree of Public Information Dissemination (December 2004). Available at SSRN: https://ssrn.com/abstract=637670 or http://dx.doi.org/10.2139/ssrn.637670

Frank Heinemann (Contact Author)

Berlin Institute of Technology ( email )

Strasse des 17. Juni 135
H 52
Berlin, 10623
Germany

HOME PAGE: http://www.macroeconomics.tu-berlin.de/Heinemann.html

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Camille Cornand

Groupe d'Analyse et de Théorie Economique (GATE), CNRS, University of Lyon ( email )

93 Chemin des Mouilles
Ecully, 69130
France

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