A stronger economy through information
Economies with dispersed information are faced with the challenge of proper welfare analysis. Problems such as a lack of understanding of interaction between payoff and informational externals are a result. Avoidance of welfare analysis due to a lack in well-defined welfare benchmarks is also an issue. The EU-funded project INFOCOMP (Information and competition) sought to remove such important stumbling blocks. Work involved the development of a series of models where agents can utilise complex strategies such as supply functions or demand schedules. The tools used to achieve this included game theory, information economics, market microstructure analysis, theoretical industrial organisation and financial intermediation theory. Results have the potential for wide application in the scheme of markets. This includes the understanding of trading and price functions in financial markets, and identifying the mechanisms of financial crises and the methods that may thwart or lessen them. Applications will be of most use to industrial organisations and banking and finance institutions.
