Public disclosure and private information acquisition: A global game approach

Abstract

This paper studies public information disclosure in a model of dynamic financial markets with endogenous information acquisition. Due to an information complementarity, multiple equilibria may emerge, complicating comparative statics analysis. By adding noise to agents' information costs, we establish equilibrium uniqueness using global-game techniques. We show that while public information always crowds out private information in all underlying equilibria, it can crowd in private information acquisition in the unique global-game equilibrium. This result is driven by the strategic uncertainty introduced through the global-game refinement. The crowding-in effect is more pronounced when there is a high level of fundamental uncertainty, which supports the case for greater information disclosure during times of increased market volatility.