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The Benefit of Mixing Private Noise into Public Information in Beauty Contest Games

Author

Listed:
  • Arato Hiroki

    (Tokyo Metropolitan University, arato@tmu.ac.jp)

  • Nakamura Tomoya

    (Kyoto University and Osaka University, tomoya_a_25e@yahoo.co.jp)

Abstract

The authorities often disclose their economic forecasts to the public ambiguously. The more ambiguous the way in which they present the information, the more variously market participants interpret such announcements. Hence, an ambiguous public announcement mixes some private noise to the authorities’ economic forecasts. Using Keynesian beauty contest games, as in Morris and Shin (2002), we find that mixing private noise into public information is often socially beneficial. We also derive the optimal information dissemination policy and find that (i) for a given level of ambiguity, it may be better not to release information, and (ii) if ambiguity can be chosen freely, it is optimal to release the most precise information, but with an appropriate degree of ambiguity.

Suggested Citation

  • Arato Hiroki & Nakamura Tomoya, 2011. "The Benefit of Mixing Private Noise into Public Information in Beauty Contest Games," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-17, March.
    • Handle: RePEc:bpj:bejtec:v:11:y:2011:i:1:n:8
    DOI: 10.2202/1935-1704.1694
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    References listed on IDEAS

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    1. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
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    6. Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, April.
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    Cited by:

    1. Nuzzo, Simone & Morone, Andrea, 2017. "Asset markets in the lab: A literature review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 13(C), pages 42-50.
    2. Arato, Hiroki & Hori, Takeo & Nakamura, Tomoya, 2021. "Endogenous information acquisition and the partial announcement policy," Information Economics and Policy, Elsevier, vol. 55(C).
    3. Trabelsi, Emna & Hichri, Walid, 2021. "Central Bank Transparency with (semi-)public Information: Laboratory Experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    4. Alfarano, Simone & Camacho, Eva & Petrovic, Marko & Provenzano, Giulia, 2014. "The Interplay between Public and Private Information in Asset Markets: Theoretical and Experimental Approaches," FinMaP-Working Papers 9, Collaborative EU Project FinMaP - Financial Distortions and Macroeconomic Performance: Expectations, Constraints and Interaction of Agents.
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    6. Hiroki Arato & Tomoya Nakamura, 2013. "Endogenous Alleviation of Overreaction Problem by Aggregate Information Announcement," The Japanese Economic Review, Japanese Economic Association, vol. 64(3), pages 319-336, September.

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