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Direct sale of information when precision is unobservable

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  • Saltuk Ozerturk

Abstract

This paper studies the incentives of an information seller to provide precise information when precision is not observable and investors with rational expectations can extract information from the equilibrium asset price. I show that the seller can verify her precision by employing a non-linear contract. I derive the equilibrium fee for information as a function of the seller's incentives, the sales volume, and buyers' trading intensity. I also analyse the implications of allowing the seller to trade on her own account for truthfulness and precision choice.

Suggested Citation

  • Saltuk Ozerturk, 2004. "Direct sale of information when precision is unobservable," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 269-293, May.
    • Handle: RePEc:cje:issued:v:37:y:2004:i:2:p:269-293
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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