The value of information about product quality

Research output: Contribution to journalArticle

29 Scopus citations

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
DOIs
StatePublished - Jan 1 1996
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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