Sources of consumer information.

Régis Renault (Université Cergy-Pontoise)

November 21, 2022, 14:15–15:30

Room Auditorium 4

Industrial Organization seminar


Consumers can either acquire product information at some cost or base their purchase decision solely on whatever information the seller provides. The optimal information design by a monopoly firm deters information acquisition completely and induces a purchase if and only if the consumer's valuation exceeds a certain threshold. As the information acquisition cost increases, the probability of a purchase increases, consumer welfare deteriorates while profit and social welfare are improved until they reach their first best level. The ability of the firm to inform the consumer may either benefit or hurt the consumer so that, if providing information is costly, the firm informs either too much or too little as compared to a second best social optimum. Joint with Frédéric Koessler (HEC Paris).