Must Public Information Always Crowd Out Private Information?

No. This paper overturns the conventional wisdom in a dynamic model of financial markets where information is linked intertemporally: more information today affects the volatility of resale asset prices in the future. This dynamic complementarity gives rise to multiple information equilibria. Under a tractable global game refinement, the unique equilibrium features crowding in: more public information can induce more private information acquisition. This is due to a novel coordination effect: public disclosure affects prices tomorrow, raising the payoff risk today and hence the value of information. A higher value of information facilitates coordination on the good information equilibrium, thus crowding in more private information acquisition. This effect is more pronounced when fundamental uncertainty is high and reverts back to crowding out when uncertainty is low. Omitting this coordination effect could lead the regulator to falsely disclose too little public information, especially in recessions, which are often associated with rising uncertainty