Information acquisition with heterogeneous valuations

Abstract We study the market for a risky asset with uncertain heterogeneous valuations. Agents seek to learn about their own valuation by acquiring private information and making inferences from equilibrium price. As agents of one type gather more information, they pull price closer further away valuations other types. Thus exert negative learning externality on This in turn implies that lower cost induces all acquire information. Private production is typically not socially optimal. In case two types who differ we can always find Pareto improvement entails an increase aggregate amount higher proportion produced low-cost type.