Evans, R., Park, I-U.

Third-Party Sale of Information

CWPE2233

Abstract: We study design and pricing of information by a monopoly information provider for a buyer in a trading relationship with a seller. The profit-maximizing information structure has a binary threshold character. This structure is inefficient when seller production cost is low. Compared with a situation of no information, the information provider increases welfare if cost is high but reduces it if cost is low. A monopoly provider creates higher welfare than a competitive market in information if the prior distribution of buyer valuations is not too concentrated. Giving the seller a veto over the information contract generates full efficiency.

Keywords: Information Sale, Mechanism Design, Information Design

JEL Codes: D61 D82 D83 L12 L15

Author links: Robert Evans

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2233.pdf