Discussion Paper Details

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Title: Competitive Search and the Social Value of Public Information

Author(s): Piotr Denderski and Eeva Mauring

Publication Date: January 2022

Keyword(s): Aggregate risk, competitive search, price dispersion, public information, transparency and Uncertainty shocks

Programme Area(s): Financial Economics, Industrial Organization and Labour Economics

Abstract: We study the social value of public information in an economy with competitive search and aggregate risk. While perfect information is always optimal, marginal effects of information can be positive, negative or neutral for trade. Equilibria featuring inefficient price dispersion, or the absence of trades in some states of the world, can arise. This is because imperfect information introduces non-concavity in expected profits of sellers. The salient features of the matching function and aggregate risk matter for how information affects the equilibrium. We also find that entry is in general inefficient.

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Bibliographic Reference

Denderski, P and Mauring, E. 2022. 'Competitive Search and the Social Value of Public Information'. London, Centre for Economic Policy Research.