The Value of Scattered Information
47 Pages Posted: 4 Oct 2016 Last revised: 6 Oct 2022
Date Written: October 5, 2022
We analyze a model in which the value of a security is comprised of multiple distinct parts and private information about these pieces is scattered among investors. We show that as information is scattered into smaller, distinctively informative pieces, endogenous information acquisition activity can increase, even if the acquisition cost does not decrease. As a result, an information monopolist has an incentive to sell scattered information. Our model generates new insights and testable predictions about financial information markets, segmentation of firm-specific information, and informed trading.
Keywords: Asymmetric Information, Multiple Dimensions of Uncertainty, Information Acquisition, Information Monopolist
JEL Classification: D82, G14
Suggested Citation: Suggested Citation