This paper studies the exchange of information between two principals who contract sequentially with the same agent, as in the case of a buyer who purchases from multiple sellers. We show that when (a) the upstream principal is not personally interested in the downstream level of trade, (b) the agent’s valuations are positively correlated, and (c) preferences in the downstream relationship are separable, then it is optimal for the upstream principal to offer the agent full privacy. On the contrary, when any of these conditions is violated, there exist preferences for which disclosure is strictly optimal, even if the downstream principal does not pay for the information. We also examine the effects of disclosure on welfare and show that it does not necessarily reduce the agent’s surplus in the two relationships and in some cases may even yield a Pareto improvement. The paper describes this condition and its implications.
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1404.
Length: Date of creation: Mar 2005 Date of revision: Handle: RePEc:nwu:cmsems:1404
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Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Dirk Bergemann & Juuso Valimaki, 1998.
"Dynamic Common Agency,"
Discussion Papers
1259, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Giacomo Calzolari & Alessandro Pavan, 2003.
"Monopoly with Resale,"
Working Papers
2003.20, Fondazione Eni Enrico Mattei.
[Downloadable!]
Other versions:
Giacomo Calzolari & Alessandro Pavan, 2004.
"Monopoly with Resale,"
Discussion Papers
1393, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Giacomo Calzolari & Alessandro Pavan, 2005.
"Monopoly with Resale,"
Discussion Papers
1405, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Andrew F. Daughety & Jennifer F. Reinganum, 2008.
"Privacy, Publicity, and Choice,"
Working Papers
0809, Department of Economics, Vanderbilt University.
[Downloadable!]
Other versions:
Andrew F. Daughety & Jennifer F. Reinganum, 2008.
"Settlement,"
Working Papers
0808, Department of Economics, Vanderbilt University.
[Downloadable!]
Heski Bar-Isaac & Ian Jewitt & Clare Leaver, 2007.
"Information and Human Capital Managment,"
Working Papers
07-29, New York University, Leonard N. Stern School of Business, Department of Economics.
[Downloadable!]
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