There are many sources of misallocation in an economy and correcting these can increase welfare. In the past, economists have focused on the misallocation effects of taxes or different regulations. One key source of misallocation thoroughly studied in microeconomics is asymmetric information, but this has not been extended to a macroeconomic environment, which is crucial to understand the welfare implications. I propose a macroeconomic model where asymmetric information is the source of misallocation. I apply this to the opioid crisis and plan to use it to understand the welfare consequences of this crisis.
