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The B.E. Journal of Theoretical Economics

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Monopolistic Signal Provision

Luis Rayo
  • Corresponding author
  • The London School of Economics and Political Science, Department of Management, London, United Kingdom
  • Email:
Published Online: 2013-05-08 | DOI: https://doi.org/10.1515/bejte-2012-0003


I study a monopolist who sells a signal to a consumer with a hidden type. The consumer uses this signal to obtain social status, defined as the expectation of the consumer’s type conditional on the signal. The monopolist must decide how accurately different types are revealed. When pooling subsets of types, she reduces social surplus, but extracts greater information rents. I derive the optimal mechanism by examining the covariance between the consumer’s type and his virtual marginal value of social status.

Keywords: nonlinear pricing; signaling; information disclosure


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About the article

Published Online: 2013-05-08

Published in Print: 2013-01-01

Citation Information: The B.E. Journal of Theoretical Economics, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2012-0003. Export Citation

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