The Social Value of Asymmetric Information Revisited

In contrary to previous literature, we show in the Grossman-Stiglitz model of noisy rational expectation that the social value of asymmetric information can be improved with more informative prices when being informed is uncertain. Investors always benefit from a privately payoff-relevant information, but they have to pay more to increase the probability of observing the information. In equilibrium, this trade-off can lead to high-risk, high return investments. Consequently the marginal expected utility gain from observing the information is not completely washed out by the cost of information acquisition, which leads to Pareto-optimal equilibrium and improves investors' welfare

Behavioral Economics and the Public Sector

This thesis consists of four essays dealing with topics that are relevant for the public sector. The essays cover diverse issues of economics partly overlapping with political science. The topics reach from the taxation of labor over monetary policy to preferences over voting institutions. Throughout this thesis it is, in contrast to classical economics, not assumed that humans are necessarily fully rational. Once full rationality is no longer assumed, experiments become an important tool to learn about human behavior. Consequently, most of the work in this thesis makes use of economic experiments

MONETARY AND FISCAL POLICY DESIGN AT THE ZERO LOWER BOUND: EVIDENCE FROM THE LAB

The global economic crisis of 2007\u20132008 has pushed many advanced economies into a liquidity trap. We design a laboratory experiment on the effectiveness of policy measures to avoid expectation-driven liquidity traps. Monetary policy alone is not sufficient to avoid liquidity traps, even if it preventively cuts the interest rate when inflation falls below a threshold. However, monetary policy augmented with a fiscal switching rule succeeds in escaping liquidity trap episodes. We measure the effect of fiscal policy on expectations, and report larger-than-unity fiscal multipliers at the zero lower bound. Experimental results in different treatments are well explained by adaptive learning. (JEL E70, C92, D83, D84, E52, E62)