Does Information and Transparency Even Matter?

Basic economic theory argues that better information leads to more efficient choices, allocations, and outcomes including better rates and levels of productivity, profitability and growth with lower costs and so on. But how ’bout some empirical proof?

This article presents 4 actual papers verifying various aspects of economic theory of information.

  1. Can Improved Market Information Benefit Both Producers and Consumers? Evidence from the Hass Avocado Board’s Internet Information Program
    1. Concludes that better market information in an avocado market made both producers and consumers better off by stabilizing prices and reducing marketing margins.
  2. Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Health Sector
    1. Concludes that price transparency “might lead to more efficient outcomes and lower prices” in the healthcare market, and notes that, “Many empirical studies have investigated how changes in price transparency have affected various markets. Most of this evidence, largely relating to advertising restrictions and lower search costs on the Internet, suggests that price transparency leads to lower and more uniform prices, a view consistent with predictions of standard economic theory.”
  3. ADRs, Analysts, and Accuracy: Does Cross Listing in the United States Improve a Firm’s Information Environment and Increase Market Value?
    1. Demonstrates that when more people become more familiar with a firm there are more accurate predictions made about the firm’s future performance.
    2. In their words, “Overall, our findings support the hypothesis that important informational effects occur with cross listing and that these effects are positively associated with firm value.”
  4. Prediction market accuracy in the long run
      Concludes that prediction markets are more accurate about 74% of the time, or over longer time horizons from the predicted event. Specifically, 100+ day time horizon forecasts.

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