Oligopolistic Information Markets

Peter Achim and Roland Strausz

No 554, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: In modern information markets, buyers routinely combine signals from multiple sellers. We develop a model of ``portfolio competition'' to analyze this distinctive feature. We show that the combinability of information overturns standard oligopoly intuition. Unlike traditional markets, competitive pressure does not necessarily protect buyers: when signals are complements, sellers can leverage the buyer's desire for the joint portfolio to extract the full social surplus, regardless of the number of competitors. We characterize the precise conditions for rent extraction, which reduce to a simple geometric test for symmetric sellers. Furthermore, we find that the canonical logic of market entry fails. Entry is never socially excessive because efficient portfolio choices eliminate business-stealing effects. Paradoxically, entry can reduce competitive pressure: when entrants provide strong complementarities, they shift the buyer's threat point, allowing all sellers to extract higher rents.

Keywords: information markets; portfolio competition; market entry; data economy; complementarity (search for similar items in EconPapers)
Date: 2025-11-25
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
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