COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1743R

SELLING INFORMATION

Johannes Hörner and Andrzej Skrzypacz

December 2009
Revised August 2011

We characterize optimal selling protocols/equilibria of a game in which an Agent first puts hidden effort to acquire information and then transacts with a Firm that uses this information to take a decision. We determine the equilibrium payoffs that maximize incentives to acquire information. Our analysis is similar to finding ex ante optimal self-enforcing contracts since information sharing, outcomes and transfers cannot be contracted upon. We show when and how selling and transmitting information gradually helps. We also show how mixing/side bets increases the Agent's incentives.

Keywords: Value of information, Dynamic game

JEL Classification: C72, D82, D83