Abstract
The present paper treats two important problems in financial economics, one relating to tradable securities and the other to publicly held information.1 Suppose it has been decided that an (apparent) improvement will be made in the operation of a particular financial market. This “improvement” will take one of two possible forms:
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1.
A new (tradable) security will be introduced; and/or
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2.
Better public information will be made available.
It is now widely understood that neither of these so-called improvements need lead to welfare gains, and in fact can result in unambiguous welfare losses!
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References
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© 1983 Springer Science+Business Media Dordrecht
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Milne, F., Shefrin, H.M. (1983). Welfare Losses Arising from Increased Public Information, and/or the Opening of New Securities Markets: Examples of the General Theory of the Second Best. In: Stigum, B.P., Wenstøp, F. (eds) Foundations of Utility and Risk Theory with Applications. Theory and Decision Library, vol 37. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-1590-4_21
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DOI: https://doi.org/10.1007/978-94-017-1590-4_21
Publisher Name: Springer, Dordrecht
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