Socially Optimal Coordination: Characterization and Policy Implications / George-Marios Angeletos, Alessandro Pavan.

Format:

Book

Author/Creator:

Angeletos, George-Marios.

Contributor:

National Bureau of Economic Research.

Pavan, Alessandro.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12778.

NBER working paper series no. w12778

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Socially Optimal Coordination

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

In recent years there has been a growing interest in macro models with heterogeneity in information and complementarity in actions. These models deliver promising positive properties, such as heightened inertia and volatility. But they also raise important normative questions, such as whether the heightened inertia and volatility are socially undesirable, whether there is room for policies that correct the way agents use information in equilibrium, and what are the welfare effects of the information disseminated by the media or policy makers. We argue that a key to answering all these questions is the relation between the equilibrium and the socially optimal degrees of coordination. The former summarizes the private value from aligning individual decisions, whereas the latter summarizes the value that society assigns to such an alignment once all externalities are internalized.

Notes:

Print version record

December 2006.