Monopoly Data Sales over Information-Sharing Networks

This paper studies the monopoly data seller's problem when users are connected through an information-sharing network. When users' prior information is sufficiently noisy, the seller's optimal strategy targets a maximum independent set - the largest subset of users with no direct links. In this regime, data precision falls as the network becomes denser, yet we show - using the Caro–Wei bound, a classical result in graph theory - that it remains strictly above the socially efficient level in most networks. Further, any core-periphery network is Pareto-efficient, and any Pareto-efficient network exhibits a quasi-core-periphery structure. When users can coordinate network formation, the resulting equilibrium network also takes this form. Finally, we quantify the value of network information by comparing the seller profit to that with a misbelief.