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Optimal Degree of Public Information Dissemination

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  • Camille Cornand
  • Frank Heinemann

Abstract

Financial markets and macroeconomic environments are often characterised by positive externalities. In these environments, transparency may reduce expected welfare: public announcements serve as focal points for higher‐order beliefs and affect agents’ behaviour more than justified by their informational contents. Some scholars conclude that reducing public signals’ precision or entirely withholding information may improve welfare. This article 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.

Suggested Citation

  • Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, April.
    • Handle: RePEc:wly:econjl:v:118:y:2008:i:528:p:718-742
    DOI: 10.1111/j.1468-0297.2008.02139.x
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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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