Abstract
Few would disagree that information is a central issue in economic analysis. Information matters not only on the level of the individual decision maker, but also with respect to the functioning of markets and, what is more, entire economies. While studies of the effects of information on an economy can be traced back to von Hayek (1937),1 it is only in the last 25 years that an independent area of research has been established. Under the heading of economics of information, this area takes on a central position in microeconomic theory. However, up until today, no single generally accepted definition of economics of information has been established. The main reason is that the term is applied to various different fields. While some authors view information economics as a certain branch of economic theory, such as e. g. environmental or health economics,2 others argue that informational problems play a crucial role in all aspects of economics, and should therefore constitute a part of every area of economic theory.3
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Notes
See von Hayek (1937)
‘The economics of imperfect information is therefore an integral part of the theory of industrial organization.’ Phlips (1988), p.4.
‘I wanted to suggest that informational considerations were, in fact, central to the analysis of a wide variety of phenomena, that they constituted a central part of the Foundations of Economic Analysis.’ Stiglitz (1984), p.21.
See Stigler (1961).
See for example Reinganum (1983) and Dasgupta and Stiglitz (1980).
An overview of the theory of contracts theory can be found in e.g. Hart and Holmström (1988) or Salanié (1996).
‘Thus, the empirically observed phenomenon of sticky real wages and layoffs may in fact be the outcome of jointly optimizing behaviour on the part of workers and firms who enter into long-term, unwritten agreements.’ Taylor (1988), p.139.
‘Thus, information is not merely a good that is desired and acquired but is to some extent a commodity like others whose markets we study.’ Arrow (1973), p.142.
‘Yet another problem …that arises when one attempts to analyze information as an economic commodity is that information structures are inherently indivisible and useful only in integer amounts.’ Allen (1990), p.270.
‘In particular, the well-known Shannon measure which has been so useful in communications engineering is not in general appropriate for economic analysis because it gives no weight to the value of information.’ Arrow (1973), p.138.
On the theory of economies in distribution form see Hildenbrand (1974), p.124-127 or Ellickson (1993), p.127-132.
Hirshleifer and Riley (1992), p.169.
‘… traders can remember some of their information after it has been sold to another agent …’ (Allen (1986), p.11. ‘… making many copies or using the information and then passing it along to someone else is precluded.’ Allen (1986), p.3.
‘This alleviates the incentives problems associated with moral hazard and lies, as well as the possibilities for strategically withholding information from others.’ Allen (1988), p.4.
‘The reader should imagine that the information here takes the form of a written report or data on a computer tape. … Some other examples of the information considered in my paper include magazines and newspapers, various financial newsletters, scientific instruments.… ’Allen (1988), p.2.
Hirshleifer and Riley (1992), p.168. The concept message used by Hirshleifer and Riley corresponds to an information in the framework considered here.
‘… the net trade between any group of agents and the group of all other agents in the economy can at most depend upon information that is common to both groups of agents.’ Radner (1968), p.50
Radner (1968), p.50.
Radner provides an example where he considers the possibility that an agent can use resources to change his information. However, this generally leads to the occurrence of nonconvexities in the consumption and technology sets, so that the usual conditions for the existence of a Walrasian equilibrium are, in general, not fulfilled.
Radner (1982), p.948
See e.g. Radner (1972).
For a survey of this area of research, cf. Jordan and Radner (1982).
See e.g. Allen (1981) or Radner (1986).
Besides the different models mentioned, there is extensive literature in the field of welfare economics, in which the question of the implementation of a social choice function is investigated. The assumption is frequently made that the agents or planners are informed asymmetrically about relevant parameters (e.g. preferences). As the main concern of the welfare theoretic contributions is not the analysis of a given economy with asymmetric information, but the construction of incentive compatible mechanisms, this literature will not be dealt with here. For an overview of these models, cf. Moore (1990) and Palfrey (1990).
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Schwalbe, U. (1999). Introduction — Information in Models of General Equilibrium. In: The Core of Economies with Asymmetric Information. Lecture Notes in Economics and Mathematical Systems, vol 474. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-58477-0_1
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