Efficient use of information and social value of information

George Marios Angeletos*, Alessandro Pavan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

197 Scopus citations


This paper analyzes equilibrium and welfare for a tractable class of economies (games) that have externalities, strategic complementarity or substitutability, and heterogeneous information. First, we characterize the equilibrium use of information: complementarity heightens the sensitivity of equilibrium actions to public information, raising aggregate volatility, whereas substitutability heightens the sensitivity to private information, raising cross-sectional dispersion. Next, we define and characterize an efficiency benchmark designed to address whether the equilibrium use of information is optimal from a social perspective; the efficient use of information reflects the social value of aligning choices across agents. Finally, we examine the comparative statics of equilibrium welfare with respect to the information structure; the social value of information is best understood by classifying economies according to the inefficiency, if any, in the equilibrium use of information. We conclude with a few applications, including production externalities, beauty contests, business cycles, and large Cournot and Bertrand games.

Original languageEnglish (US)
Pages (from-to)1103-1142
Number of pages40
Issue number4
StatePublished - Jul 1 2007


  • Amplification
  • Complementarities
  • Coordination
  • Efficiency
  • Externalities
  • Incomplete information

ASJC Scopus subject areas

  • Economics and Econometrics

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