Essays on Selling Information and Surplus

Mishara-Blomberger, Jonas

doi:https://doi.org/10.21985/n2-v26z-d389

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Essays on Selling Information and Surplus

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In the first chapter I introduce the ideas that link selling information to surplus extraction. In my environment the seller may be uncertain about how much the buyer both has already learned before contracting with the seller (belief types) and is able to learn after contracting with the seller (information types). Nevertheless, I argue that contracting on the signal of the transacted experiment is both natural and conducive to extracting the full surplus. I develop the idea of Signal Contractibility with Punishing Reports, where (on-path) all surplus has to be extracted with payments contingent on the transacted experiment, and show that it is essentially equivalent to contracting on the State, if the environment permits full surplus extraction. The main result of this chapter shows that under Signal Contractibility with Punishing Reports, for any ex-post utility of the buyer, and any set of belief types, the seller can get arbitrarily close to full surplus extraction (FSE) as long as information types are partitions. This is possible because 1) Signal contingent payments can extract the surplus state-by-state which mitigates rents from belief types, and 2) A menu of experiments can be constructed that always leaves sufficient uncertainty (off-path) to use Punishing Reports to penalize deviations to other information types. Moreover, I characterize full surplus extracting payments. I show that state-by-state surplus extraction is necessary in most environments in order to extract the full surplus. This provides conditions when contingent payments (at least Signal Contractibility) are necessary for FSE. Finally, I show FSE is impossible when the space of experiments is sufficiently rich, hence illuminating the role of partitions in the main result. In the second chapter, I consider a specific utility function that assumes that each state needs to be matched with the correct action to get positive utility (Matching Utility). Again the buyer has private information regarding both his belief and information type. Nevertheless, demonstrating the innate capability of information sale in this environment, I show that by offering suitably complementary information at appropriately designed contingent payments, Signal Contractibility without Punishing Reports is enough for FSE. These payments appear natural because they only require contracting on the realization of the signal of the transacted experiment and do not violate any plausible limited liability constraint of either party. I also show that my results are robust to the case where the seller is not only uncertain about belief and information types, but also to whether the buyer has learned through objective information at all or was born with subjective beliefs. This relaxes the common prior, an assumption seemingly indispensable to full surplus extraction through bounded payments. Finally, I show robustness to an extension in which the buyer can decide when to learn the signal realization of his information type. In the third chapter, I allow the seller to not only care about the payment received from the buyer, but also about the action that the buyer takes. I show that Signal Contractibility with Punishing Actions is the appropriate and analog Contractblity assumption in this environment for FSE. For any ex-post utility function of the seller and the buyer, any belief types of the buyer, the seller can extract the full surplus as long as the buyer's information types are partitions. Second, I apply this result to a setting with multiple buyers. I model information as a rival good such that the buyers are competitors for exclusive access to information. The seller needs to screen their type-dependent outside option, defined as the value each buyer obtains when all his rivals are perfectly informed, since I assume that the seller can credibly threaten to give full information to rivals. For any given buyer, Individual Signal Contractibility with Punishing Actions is sufficient to extract the full surplus from that buyer for a large class of interdependent utility functions of the buyers. To illustrate the result, I extend the definition of Matching Utility for multiple buyers, allowing buyers actions to affect each other.

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