Clientele, Information Sales, and Asset Prices
72 Pages Posted: 1 Oct 2017 Last revised: 13 Jul 2020
Date Written: January 30, 2018
We examine sales of financial market information in an economy with two information sellers. In equilibrium, the two sellers form either orthogonal or overlapping clientele, depending on the similarity of the information to be sold. When the two sellers' information is very distinct and sellers have relatively large bargaining power in sharing trading profits, investors' information purchase behavior exhibits complementarity, leading to the possibility of multiple equilibria. This result connects the complementarity in signals to strategic complementarity in actions. We also show that the information-market structure is crucial in determining asset prices and financial market quality.
Keywords: Clientele formation, information sales, complementarity, market quality
JEL Classification: G12, G14
Suggested Citation: Suggested Citation