The Benefit of Mixing Private Noise into Public Information in Beauty Contest Games

The authorities often disclose their economic forecasts to the public ambiguously. The more ambiguous the way in which they present the information, the more variously market participants interpret such announcements. Hence, an ambiguous public announcement mixes some private noise to the authorities' economic forecasts. Using Keynesian beauty contest games, as in Morris and Shin (2002), we find that mixing private noise into public information is often socially beneficial. We also derive the optimal information dissemination policy and find that (i) for a given level of ambiguity, it may be better not to release information, and (ii) if ambiguity can be chosen freely, it is optimal to release the most precise information, but with an appropriate degree of ambiguity.