Public Disclosure, Private Information Acquisition, and Complementarity: A Global-Games Approach

I study the effect of public information disclosure in a market setting where private information acquisition exhibits strategic complementarity. To overcome the issue of equilibrium multiplicity, I introduce heterogeneous information cost and imperfect information on the cost distribution. The resulting unique equilibrium features nonlinear responses to information disclosure. In particular, the classic \crowding-out" result can be reversed and public disclosure \crowd in" more private information acquisition. This effect is most prominent when there is high uncertainty about economic fundamental. The theory predicts that public disclosure of intermediate precision (neither too precise nor too vague) is most effective in stimulating private information acquisition.