Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 1990, Volume 58, Issue 4

Direct and Indirect Sale of Information<901:DAISOI>2.0.CO;2-F
p. 901-928

Anat R. Admati, Paul Pfleiderer

In this article we compare two methods for a monopolist to sell information. In a direct sale buyers observe the seller's signal (or noisy versions of it) and subsequently use what they observe to make investment decisions. In an indirect sale the seller creates a portfolio based on his private information and then sells shares to the traders. Indirect sale allows the seller to control more effectively the buyers' reactions to the information, but may not allow as much surplus to be extracted as is possible with direct sale. We show how the optimal selling method depends on the extent to which information is revealed by assets' equilibrium prices.

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