DP16884 Competitive Search and the Social Value of Public Information

Author(s): Piotr Denderski, Eeva Mauring
Publication Date: January 2022
Keyword(s): Aggregate risk, competitive search, price dispersion, public information, transparency, Uncertainty shocks
JEL(s): C78, D83
Programme Areas: Labour Economics, Financial Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16884

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.