Costly Information Intermediation: Quality vs. Spillovers

Daniel Monte () and Roberto Pinheiro

No 17-21R2, Working Papers from Federal Reserve Bank of Cleveland

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 (search for similar items in EconPapers)
JEL-codes: D47 D83 D85 (search for similar items in EconPapers)
Pages: 56
Date: 2017-11-16, Revised 2024-12-05
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
Note: This is a revision of Working Paper 17-21R which was issued in December of 2018.
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:172101

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DOI: 10.26509/frbc-wp-201721r2

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