Information impact on Market Performance

I realized I never mentioned this famous paper (or here) in this blog. 

The idea that the availability of more information increases agents' wellbeing has always been theoretically sound. 

Jensen, on this paper, used a key technological event to prove the theory empirically. 

"When information is limited or costly, agents are unable to engage in optimal arbitrage. Excess price dispersion across markets can arise, and goods may not be allocated efficiently. In this setting, information technologies may improve market performance and increase welfare. Between 1997 and 2001, mobile phone service was introduced throughout Kerala, a state in India with a large fishing industry. Using microlevel survey data, we show that the adoption of mobile phones by fishermen and wholesalers was associated with a dramatic reduction in price dispersion, the complete elimination of waste, and near-perfect adherence to the Law of One Price. Both consumer and producer welfare increased."


tanjacobson said…
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John Clark said…
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