Value of information in competitive economies with incomplete markets

Publication Date
Financial Markets Group Discussion Papers DP 596
Publication Authors

A substantial literature addresses the negative effect on welfare of the release of information in a competitive market economy. We show that the value of information in this setting is typically positive if asset markets are sufficiently incomplete. More specifically, for any competitive equilibrium of a generic economy, we can find a finer information structure such that an allocation that is resource feasible and measurable with respect to this information ex- post Pareto dominates the given equilibrium allocation.