SSE/EFI Working Paper Series in Economics and Finance
Information Acquisition and Learning from Prices Over the Business Cycle
() and Björn Ohl
Abstract: We study firms’ incentives to acquire costly information
in booms and recessions to understand the role of endogenous information in
explaining business cycles. We find that when the economy has been in a
boom in the previous period, and firms enter the current period with an
optimistic belief, the incentive to acquire information is weaker than when
the economy has been in a recession and firms share a pessimistic belief.
However, the price system, by transmitting information from informed to
uninformed firms, dampens information demand and moderates the cyclicality
of the aggregate learning outcome. Even though learning from equilibrium
prices acts to stabilize fluctuations by discouraging information
acquisition, it can be welfare-enhancing to make information prohibitively
costly to obtain.
Keywords: information acquisition; rational expectations equilibrium; asymmetric information; strategic substitutability; (follow links to similar papers)
JEL-Codes: D51; D83; E32; (follow links to similar papers)
33 pages, February 13, 2012, Revised March 19, 2013
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom