The value of information about product quality

Research output: Contribution to journalArticle

28 Citations (Scopus)

Abstract

Both consumers and a monopolist producer are uncertain about a good's quality. I derive conditions under which the value of public information about quality will be positive or negative to consumers and the firm. I find that the firm always prefers more information, but consumers may not. I identify two properties of costs functions that lead to a negative value of information for consumers: increasing returns to scale and "sufficiently" convex marginal costs. If, however, demand and cost functions are linear, then consumers always prefer more information. I also analyze the aggregate value of information and extensions to nonmonopolistic markets.

Original languageEnglish (US)
Pages (from-to)803-815
Number of pages13
JournalRAND Journal of Economics
Volume27
Issue number4
StatePublished - Dec 1996
Externally publishedYes

Fingerprint

Information products
Product quality
Value of information
Cost function
Information quality
Demand function
Consumer information
Public information
Increasing returns to scale
Marginal cost
Monopolist

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

The value of information about product quality. / Schlee, Edward.

In: RAND Journal of Economics, Vol. 27, No. 4, 12.1996, p. 803-815.

Research output: Contribution to journalArticle

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