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Interpreting How Others Interpret It: Social Value of Public Information

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  • Alia Gizatulina

Abstract

This paper studies the social value of public information in environments without common knowledge of data-generating process. We show that the stronger is the coordination motive behind agents behaviour, the more they would like to interpret private or public signals in the way that they suspect others are doing it. Consequently, the negative impact of public communication noted by Morris and Shin (2004) can be amplified if agents have doubts whether others take the public signal too literally and/or are too inattentive to their private signals. The social welfare increases when each agent evaluates the precision of public signal correctly but believes that others did not understand the public signal at all, which suggests that there is a scope for the central bank to “obliterate” its communication in a specific way, by making it, e.g., sophisticated and technical.

Suggested Citation

  • Alia Gizatulina, 2012. "Interpreting How Others Interpret It: Social Value of Public Information," CESifo Working Paper Series 3787, CESifo.
    • Handle: RePEc:ces:ceswps:_3787
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    References listed on IDEAS

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    8. Stephen Morris & Hyun Song Shin & Hui Tong, 2006. "Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply," American Economic Review, American Economic Association, vol. 96(1), pages 453-455, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    central bank communication; transparency; common p-belief; coordination game; higher-order uncertainty;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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