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Selling information for bilateral trade

Author

Listed:
  • Evans, Robert

    (Department of Economics, Cambridge University)

  • Park, In-Uck

    (Department of Economics, University of Bristol)

Abstract

We study the design and pricing of information by independent information providers for a buyer engaged in a trading relationship with a seller, and examine their welfare implications. While competitive information firms would sell full information about the value of the good, a monopolist supplies limited information in a particularly simple form---often resulting in higher total surplus than under full information, by influencing the seller's pricing decision. If only a single information structure can be offered, it takes a binary threshold form. If the provider can offer a menu of priced information structures before the seller sets a price, he offers a continuum of thresholds, inducing a unit-elastic demand function for the seller. In both scenarios, the information firm increases total welfare when the seller's production cost is high but reduces it when the cost is low.

Suggested Citation

  • Evans, Robert & Park, In-Uck, 0. "Selling information for bilateral trade," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:6624
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    Keywords

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    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • 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
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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