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Selling information in competitive environments

Author

Listed:
  • Bonatti, Alessandro
  • Dahleh, Munther
  • Horel, Thibaut
  • Nouripour, Amir

Abstract

Data buyers compete in a game of incomplete information about which a single data seller owns some payoff-relevant information. The seller faces a joint information- and mechanism-design problem: deciding which information to sell, while eliciting the buyers' types and imposing payments. We derive the welfare- and revenue-optimal mechanisms for a class of games with binary actions and states. Our results highlight the critical properties of selling information in competitive environments: (i) the negative externalities arising from buyer competition increase the profitability of recommending the correct action to one buyer exclusively; (ii) for the buyers to follow the seller's recommendations, the degree of exclusivity must be limited; (iii) the buyers' obedience constraints also reduce the distortions in the allocation of information introduced by a monopolist; (iv) as competition becomes fiercer, these limitations become more severe, weakening the impact of market power on the optimal allocation of information.

Suggested Citation

  • Bonatti, Alessandro & Dahleh, Munther & Horel, Thibaut & Nouripour, Amir, 2024. "Selling information in competitive environments," Journal of Economic Theory, Elsevier, vol. 216(C).
    • Handle: RePEc:eee:jetheo:v:216:y:2024:i:c:s0022053123001758
    DOI: 10.1016/j.jet.2023.105779
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    References listed on IDEAS

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    More about this item

    Keywords

    Data; Competition; Screening; Information design; Externalities;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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