Olga Kuznetsova Spoke on 'Public Information and Strategic Interaction of Policymakers'

On April 28 a research seminar on political economy took place at HSE.

Olga Kuznetsova (HSE) spoke on 'Public Information and Strategic Interaction of Policymakers'. The event was organised by the School of Mathematics and the New Economic School. 

Abstract:

The literature that analyzes the social value of public information has considerably expanded in recent years. Nevertheless, majority of existing studies neglects the fact that in reality public signals come from different agents with different goals. Thus the primary goal of our research is to fill this gap and to investigate the informational interaction of policymakers who have different objectives and can use public signals to influence private agents. For this purpose we build a model of two-region economy that is hit by two idiosyncratic shocks. Information structure is defined by two policymakers each of which maximizes welfare of one of the regions. We find out that equilibrium information strategies can be not optimal from the social planner point of view: the policymaker from a small region tends to be too transparent while the policymaker from the big region may be too opaque. Moreover, we show that characteristics of social optimum in our model differ significantly from the standard for this literature field: transparency may be detrimental only if strategic complementarity is low.