TY  - JOUR
AU  - Angeletos,George-Marios
AU  - Pavan,Alessandro
TI  - Socially Optimal Coordination: Characterization and Policy Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12778
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12778
L1  - http://www.nber.org/papers/w12778.pdf
N1  - Author contact info:
George-Marios Angeletos
Department of Economics
MIT E52-251
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/452-3859
Fax: 617/253-1330
E-Mail: angelet@mit.edu

Alessandro Pavan
Northwestern University
Department of Economics
2001 Sheridan Road
Arthur Andersen Hall 3239
Evanston, IL 60208
E-Mail: alepavan@northwestern.edu
AB  - In recent years there has been a growing interest in macro models with heterogeneity in information and complementarity in actions. These models deliver promising positive properties, such as heightened inertia and volatility. But they also raise important normative questions, such as whether the heightened inertia and volatility are socially undesirable, whether there is room for policies that correct the way agents use information in equilibrium, and what are the welfare effects of the information disseminated by the media or policy makers. We argue that a key to answering all these questions is the relation between the equilibrium and the socially optimal degrees of coordination. The former summarizes the private value from aligning individual decisions, whereas the latter summarizes the value that society assigns to such an alignment once all externalities are internalized.
ER  -