Competition in Markets for Information

34 Pages Posted: 2 Mar 2000

See all articles by Andrei Simonov

Andrei Simonov

Michigan State University - Eli Broad Graduate School of Management; Russian Presidential Academy of National Economy and Public Administration (RANEPA); Centre for Economic Policy Research (CEPR)

Date Written: August 1999

Abstract

Competition among sellers of information in a noisy rational expectation equilibrium is considered. Trader's preferences for information are explicitly characterized. It is shown that the competition on market for information makes providers of financial information to price their products in a way that leads traders to purchase all signals available. If signals are substitutes, competition pushes the price of information lower than that in monopolistic settings. However, if signals are complements, the price of an individual signal in duopoly actually exceeds the one in monopolistic settings, and information producers are involved in tacit collusion. Externalities of information lead to counterintuitive results that (a) efficiency of the competitive market for information (as measured by quality of signals offered for sale) is no better than in monopolistic setting, and (b) competition leads to no improvement on the part of the traders as providers of financial information are still able to appropriate all of the consumer surplus.

JEL Classification: G20, G14, D43, D80, D84

Suggested Citation

Simonov, Andrei, Competition in Markets for Information (August 1999). Available at SSRN: https://ssrn.com/abstract=209309 or http://dx.doi.org/10.2139/ssrn.209309

Andrei Simonov (Contact Author)

Michigan State University - Eli Broad Graduate School of Management ( email )

645 N. Shaw Lane, 321 Eppley Center
East Lansing, MI 48824-1122
United States

HOME PAGE: http://www.andreisimonov.com

Russian Presidential Academy of National Economy and Public Administration (RANEPA) ( email )

Vernadskogo Prospect 82
Moscow, 119571
Russia

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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