Working Paper Revision

Costly Information Intermediation: Quality vs. Spillovers

Abstract: We analyze information intermediaries in large economies with costly information acquisition. Intermediaries face a trade-off between quality and dissemination speed. Both altruistic policymakers and profit-maximizing monopolists optimally choose to sample limited information, increasing the number of partially informed agents and enhancing spillovers despite slower information accumulation. Altruistic information-sharing bureaus minimize fees by inducing low provider default rates, while monopolist bureaus maximize fees through higher faulty service rates. Information trade resembles a natural monopoly, where competition reduces efficiency through redundant costs and lower information spillovers. These findings inform regulatory design in platforms and information-intensive markets.

Keywords: Natural Monopoly; Market Structure; Costly Information trade;

JEL Classification: D47; D83; D85;

https://doi.org/10.26509/frbc-wp-201721r2

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2024-12-05

Number: 17-21R2

Note: This is a revision of Working Paper 17-21R which was issued in December of 2018.

Related Works

• Working Paper Revision (2024-12-05) : You are here.
• Working Paper Original (2017-11-16) : Costly Information Intermediation as a Natural Monopoly