Optimal information structure in a simple economic system

In a highly simplified version of a common economic model, the planner can choose among alternative time-varying designs for the information structure in order to steer the system to a target state in an optimal way. The resulting problem is imbedded into a more general one with bilinear dynamics, that is, linear in the control and the state variables but not in both. The existence of a feasible decentralized information structure is studies and designs are found which make the system optimal, given a performance function assigning losses to deviations froma target state. The conditions under which a decentralized structure is optimal are also studied and a numerical case is considered.