Conferences at Department of Economics, University of Toronto, RCEF 2012: Cities, Open Economies, and Public Policy

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Paging Inspector Sands: The Costs of Public Information

Sacha Kapoor, Arvind Nathan Magesan

Last modified: 2012-06-27

Abstract


Most empirical studies on the role of information in markets analyze policies that reduce asymmetries in the information that market participants possess, often suggesting that the policies improve welfare. We exploit the introduction of pedestrian countdown signals - timers that indicate when traffic lights will change - to evaluate a policy that increases the information that all market participants possess. We find that although countdown signals reduce the number of pedestrians struck by automobiles, they increase the number of collisions between automobiles. We also find that countdown signals caused more collisions overall. The findings imply welfare gains can be attained by revealing the information to pedestrians and hiding it from drivers. We conclude that policies which increase asymmetries in information can improve welfare.

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