Last year, I wrote a report for the Council on Food, Agricultural, and Resource Economics (C-FARE) on the value of USDA data products. There, I reviewed much of the literature on the value of providing information about market conditions, and discuss the ability of information provision to resolve some asymmetric information problems.
We find that although countdown signals reduce the number of pedestrians struck by automobiles, they increase the number of collisions between automobiles. They also cause more collisions overall, implying that welfare gains can be attained by hiding the information from drivers. Whereas most empirical studies on the role of information in markets suggest that asymmetric information reduces welfare, we conclude that asymmetric information can, in fact, improve it.
Asymmetric information improving outcomes? That is an interesting result - I wonder whether there are examples in markets where something similar is at play?
I should note that it is possible to imagine other situations where more information isn't always better. In a paper I published last year with Stephan Marette, we wrote:
In a one-good case with unlimited attention, we show consumer welfare is always improved with the provision of accurate information. However, in a two-good case with limited attention, we show that consumer welfare is not always improved with the provision of accurate information. When attention is constrained, welfare may fall with information provision policies irrespective of their costs. The results suggest information and labeling polices may sometimes be counterproductive when attention is limited