The Cost of Information: The Case of Constant Marginal Costs

Luciano Pomatto, Philipp Strack and Omer Tamuz

American Economic Review, 2023, vol. 113, issue 5, 1360-93

Abstract: We develop an axiomatic theory of information acquisition that captures the idea of constant marginal costs in information production: the cost of generating two independent signals is the sum of their costs, and generating a signal with probability half costs half its original cost. Together with Blackwell monotonicity and a continuity condition, these axioms determine the cost of a signal up to a vector of parameters. These parameters have a clear economic interpretation and determine the difficulty of distinguishing states.

JEL-codes: D82 D83 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (9)

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DOI: 10.1257/aer.20190185

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