Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
883677 | Journal of Economic Behavior & Organization | 2012 | 11 Pages |
The beauty-contest framework of Morris and Shin (2002) is extended to allow sub-groups within the population of agents to differ in the quality (i.e. precision) of their private information. We discuss the inefficiency of the resulting model's equilibrium, and assess the relative effectiveness in remedying this inefficiency of: (i) a Pigouvian tax scheme; (ii) direct policy intervention by means of an instrument which can modify the state of the world. The disclosure-policy implications of each of these two policy approaches are also analyzed.
► Non-homogenous information quality in model incorporating strategic complementarities. ► Optimal disclosure implications of two alternative policy measures are analyzed. ► Pigouvian tax contingent on action choices achieves the first best. ► Disclosing policymaker private information desirable given an optimal corrective tax. ► Disclosure of such information can be undesirable given direct policy intervention.