Information Sale and Competition
This paper studies the interaction between a seller of an information product and potential buyers that compete in a downstream market. Our results illustrate that the nature and intensity of competition are key in determining the optimal strategy. We show that when customers’ actions are strategic complements, the provider finds it optimal to offer the most accurate information to all potential customers. In contrast, when customers’ actions are strategic substitutes, the provider maximizes her profits by either (i) restricting the supply of the information product, or (ii) distorting its content. We also establish that the provider’s incentive to restrict the supply information intensifies in the presence of information leakage.