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Digitized by the Internet Archive in 2011 with Funding from Information Aggregation and Equilibrium Multiplicity
| Content Provider | Semantic Scholar |
|---|---|
| Author | Acemoglu, Daron |
| Copyright Year | 2011 |
| Abstract | This paper argues that adding endogenous information aggregation to situations where coordination is important such as riots, self-ful filing currency crises, bank runs, debt crises or Qiancial crashes yields novel insights into multiplicity and characterization of equilibria. Morris and Shin (1998) have highlighted the importance of the information structure for this question. They also show that, with exogenous information, multiplicity collapses when individuals observe fundamentals with small enough idiosyncratic noise. In the spirit of Grossman and Stiglitz (1976), we endogenize public information by allowing individuals to observe Qiancial prices or other noisy indicators of aggregate activity. In equilibrium these indicators imperfectly aggregate disperse private information without ever inducing common knowledge. Importantly, their informativeness increases with the precision of private information. We show that multiplicity may survive and characterize the conditions under which it obtains. Interestingly, endogenous information typically reverses the limit result: multiplicity is ensured when individuals observe fundamentals with small enough idiosyncratic noise. JEL Codes: D8, E5, F3, Gl. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://dspace.mit.edu/bitstream/handle/1721.1/63702/informationaggre00ange.pdf?sequence=1 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
