Non-Neutral Information Costs with Match-Value Uncertainty
نویسنده
چکیده
This paper investigates a model featuring a monopolist seller and a buyer, with an uncertain valuation for the seller’s product. The seller chooses an information system (“IS”), allowing the buyer to receive a private signal, potentially correlated with her valuation. The cost of the IS is proportional to its precision, measured by the mutual information between the distributions of the buyer’s valuation and the signal. In general, the probability of a correct signal depends on the buyer’s actual valuation, and the probability of trade diUers from the probability of a valuation exceeding the cost of production. Also, the value of the optimal IS is a concave function of its mutual information.
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