DP11412 The Design and Price of Information

Author(s): Dirk Bergemann, Alessandro Bonatti, Alex Smolin
Publication Date: July 2016
Keyword(s): experiments, mechanism design, price discrimination, product differentiation, selling information
JEL(s): D42, D82, D83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11412

This paper analyzes the trade of information between a data buyer and a data seller. The data buyer faces a decision problem under uncertainty and seeks to augment his initial private information with supplemental data. The data seller is uncertain about the willingness-to-pay of the data buyer due to this private information. The data seller optimally offers a menu of (Blackwell) experiments as statistical tests to the data buyer. The seller exploits differences in the beliefs of the buyer?s types to reduce information rents while limiting the surplus that must be sacrificed to provide incentives.