The value of information in efficient risk-sharing arrangements

Research output: Contribution to journalArticlepeer-review

59 Scopus citations


Suppose that agents share risks in competitive markets. We show that better information makes everyone worse off if the economy has a representative agent -that is, the economy's demand for state-contingent consumption equals the demand of a hypothetical agent who owns all the economy's wealth. The representative agent, moreover, is normatively unrepresentative: although each agent dislikes information, the "representative" agent is indifferent. Although we emphasize pure exchange, our results imply that a representative-agent model might seriously misstate the welfare effects of improved information in an economy with production and risk sharing, even if it performs well otherwise.

Original languageEnglish (US)
Pages (from-to)509-524
Number of pages16
JournalAmerican Economic Review
Issue number3
StatePublished - Jun 2001

ASJC Scopus subject areas

  • Economics and Econometrics


Dive into the research topics of 'The value of information in efficient risk-sharing arrangements'. Together they form a unique fingerprint.

Cite this