Optimal Degree of Public Information Dissemination

Cornand, Camille and Heinemann, Frank (February 2006): Optimal Degree of Public Information Dissemination. SFB/TR 15 Discussion Paper No. 158

Abstract

Financial markets and macroeconomic environments are often characterized by positive externalities. In these environments, transparency may reduce expected welfare from an ex-ante point of view: public announcements serve as a focal point for higher-order beliefs and affect agents’ behaviour more than justified by their informational contents. Some scholars conclude that it might be better to reduce the precision of public signals or entirely withhold information. This paper shows that public information should always be provided with maximum precision, but under certain conditions not to all agents. Restricting the degree of publicity is a better-suited instrument for preventing the negative welfare effects of public announcements than restrictions on their precision are.

• Item Type: Paper
• Keywords: Transparency, public information, private information, coordination, strategic complementarity
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C3 - Innovationen in Informationstechnologien und Regulierung von Finanzmärkten
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: C73, D82, F31
• Language: English