INSEAD Library

Includes bibliographical references and index

Digitized

Information Economics Contents List of figures List of tables List of boxes List of problem sets Preface 1 Why study information economics? 2 How to use this book 2 A The purpose of the book 5 2 B Ways of reading the book 6 2 C The structure of the book 8 2D Using the book for teaching 8 2 E Solutions to problem sets and other supporting material 9 PART I Information as an economic good 3 What is information? 3 A Introduction 13 3 B Main ideas: The strangest good of all 14 3 C Theory: Describing, comparing and updating information 17 3 D Conclusions and further reading 26 3 E Problem sets: Medical and financial testing 27 4 The value of information 4 A Introduction 31 4 B Main ideas: The source(s) of information value 32 xii xiv xv xvii xxi 1 5 11 13 31 4 C Theory: Knowledge is power 37 4D Application: The resolution of uncertainty 50 4 E Application: The informational cost of mediocrity 53 4 F Conclusions and further reading 56 4 G Problem sets: Precious advice 56 5 The optimal amount of information 5 A Introduction 61 5 B Main ideas: Is it worth the cost? 62 5 C Theory: Deciding at the margin 63 5D Application: The central bank's inflation forecast 67 5 E Application: Search 70 5 F Conclusions and further reading 79 5 G Problem sets: Paying, searching, and waiting for information 80 6 The production of information 6A Introduction 83 6B Main Ideas: Too little research or too much? 86 6 C Theory: The incentive to innovate 88 6D Application: Creative destruction 97 6E Application: Rating agencies 105 6F Application: Why are banks supervised? 107 6 G Conclusions and further reading 109 6H Problem sets: Produce or copy--sell or give away? 110 PART II How the market aggregates information 7 From information to prices 7A Introduction 117 7B Main ideas: Revealing information through prices 118 7 C Theory: The market as an information processor 121 7D Application: Terrorism futures and prediction markets 135 7 E Application: Should bank supervisors look at market prices? 137 7F Conclusions and further reading 142 7 G Problem sets: Two heads know more than one 143 83 61 115 117 8 Knowing facts or reading thoughts? 8 A Introduction 145 8 B Main ideas: Fundamental versus strategic uncertainty 146 8 C Theory: Higher-order information 148 8D Application: Keynes in the lab 162 8 E Application: Conformism and learning from debate 165 8 F Application: Betrayals and mediation 167 8 G Conclusions and further reading 169 8H Problem sets: The art of outguessing others 171 9 Coordination problems 9 A Introduction 173 9 B Main ideas: Red or white? 174 9 C Theory: Coordination and multiple equilibria 180 9D Application: Bank runs 190 9 E Conclusions and further reading 200 9 F Problem sets: "Should I stay or should I go?" 201 10 Learning and cascades 10 A Introduction 203 10 B Main ideas: "Always stand at the longest queue." 205 10 C Theory: Observational learning 207 10D Application: Learning in repeated games 221 10 E Conclusions and further reading 224 10 F Problem sets: A bath in the crowd 224 11 The macroeconomics of information 11 A Introduction 227 11 B Main ideas: Who acquires information and why? 228 11 C Theory: Information is imperfect and costly 232 11 D Application: Central bank transparency 245 11 E Conclusions and further reading 248 11 F Problem sets: As time goes by 249 145 173 203 227 PART III Asymmetric information 12 The winner's curse 12 A Introduction 255 12 B Main ideas: How to lose by winning 257 12 C Theory: The importance of conditional expectations 260 12D Application: The underpricing of IPOs 266 12 E Application: Prices and the winner's curse 269 12 F Conclusions and further reading 270 12 G Problem sets: Cursing winners 271 13 Information and selection 13 A Introduction 273 13 B Main ideas: When information prevents trading 274 13 C Theory: The market for lemons 277 13 D Application: The insurance destruction effect 286 13 E Application: Annuities 293 13 F Conclusions and further reading 300 13 G Problem sets: Buying the cat in a bag 302 14 Optimal contracts 14 A Introduction 305 14 B Main ideas: The economic lie detector 307 14 C Theory: Optimal contracts 312 14D Application: Price--quality discrimination 322 14 E Application: Subordinated debt 328 14 F Conclusions and further reading 334 14 G Problem sets: Deal or no deal? 335 15 The revelation principle 15 A Introduction 341 15 B Main ideas: Many lies, one truth 342 15 C Theory: The revelation principle 343 15D Application: The debt contract 349 15 E Application: Auctions 356 15 F Application: Why Enron should not have happened 360 15 G Conclusions and further reading 362 15H Problem sets: Know your value 364 253 255 273 305 341 16 Creating incentives 16 A Introduction 367 16 B Main ideas: Delegation and moral hazard 369 16 C Theory: Incentive contracts 371 16D Application: Bank deposit insurance and risk taking 381 16 E Application: Credence goods 389 16F Conclusions and further reading 395 16 G Problem sets: Getting things done 397 367 PART IV The economics of self-knowledge 17 Me, Myself, and I 17A Introduction 403 17B Main ideas: Contracting with oneself 404 17 C Theory: Intertemporal choice and self-management 411 17D Application: Soft paternalism 425 17 E Conclusions and further reading 428 17F Problem sets: Tomorrow I will 430 Notes Bibliography Index 401 403 433 439 449