We study the interaction between the inefficiency in the acquisition of private information and trading in financial markets. We show that, as the cost of information declines, traders over-invest in information acquisition and trade too much on their private information. We also show that,...

This paper performs a welfare analysis of economies with private information when public information is endogenously generated and agents can condition on noisy public statistics in the rational expectations tradition. We find that equilibrium is not (restricted) efficient even when feasible...

This paper performs a welfare analysis of economies with private information when public information is endogenously generated and agents can condition on noisy public statistics in the rational expectations tradition. We find that equilibrium is not (restricted) efficient even when feasible...