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Speculative Trade and the Value of Public Information

Galanis, S. ORCID: 0000-0003-4286-7449 (2021). Speculative Trade and the Value of Public Information. Journal of Public Economic Theory, 23(1), pp. 53-68. doi: 10.1111/jpet.12476


In environments with expected utility, it has long been established that speculative trade cannot occur (Milgrom and Stokey [1982]), and that the value of public information is negative in economies with risk-sharing and no aggregate uncertainty (Hirshleifer [1971], Schlee [2001]). We show that these results are still true even if we relax expected utility, so that either Dynamic Consistency (DC) or Consequentialism is violated. We characterise no speculative trade in terms of a weakening of DC and find that Consequentialism is not required. Moreover, we show that a weakening of both DC and Consequentialism is sufficient for the value of public information to be negative. We therefore generalise these important results for convex preferences which contain several classes of ambiguity averse preferences.

Publication Type: Article
Additional Information: © 2020 The Authors. Journal of Public Economic Theory published by Wiley Periodicals LLC This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords: Updating, Ambiguity, Dynamic Consistency, Bayesian, Consequentialism, Value of Information, No Trade, Speculative Trade
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
Departments: School of Policy & Global Affairs > Economics
SWORD Depositor:
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