What are the implications of rational inattention for the effects of public information on individual behavior and in turn welfare? I examine the impact of rational inattention to public information in the "beauty contest" model of Morris and Shin (2002). I show that with information processing...

We examine the welfare costs of informed trade in a new sequential trade model with elastic uninformed traders. Welfare losses occur when the liquidity costs of executing a trade exceed the potential gains from the trade. With long-lived private information, more informed traders lead to better...