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Title
Monopolistic competition, idiosyncratic productivity and information constraints / von Gabriel Ziegler
AuthorZiegler, Gabriel
CensorPapp, Tamas ; Papp, Tamás
Published2014
DescriptionV, 51 Bl. : graph. Darst.
Institutional NoteWien, Techn. Univ., Master-Arb., 2014
LanguageEnglish
Document typeMaster Thesis
Keywords (EN)Imperfect information / idiosyncratic productivity / rational inattention / information theory / aggregation / welfare comparison
URNurn:nbn:at:at-ubtuw:1-76456 Persistent Identifier (URN)
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 The work is publicly available
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Abstract (English)

A firm might not have perfect information about its own productivity, because observing the true realization might be too costly in terms of op- portunity costs of attending to other sources of uncertainty. Building on Sims (1998, 2003), I use insights from information theory to study the be- havior of information constrained firms. The focus is on the informational friction on the firm side only. This allows analyzing the implications of imperfect information for individual firms. Additionally, a welfare analysis is conducted by solving a social planner's problem. Interestingly, a com- parison using approximations in log-deviations is not applicable, although such an approximation is often used in the literature. In the decentralized economy, output might not be maximized under full information. Further- more, the distortions due to monopolistic competition are increasing in the amount of information agents are allowed to process.

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