Elias Tsakas

Department of Economics
Maastricht University

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Procuring unverifiable information
(with Salil Sharma and Mark Voorneveld)

We study settings where information in the form of Bayesian signals is traded between an expert seller and a buyer. The main feature of such transactions is that information is costly for the expert to acquire and cannot be verified by the buyer. We provide a full characterization of the set of all compensation schemes (viz., menus of acts) which guarantee that the traded signal will be chosen by the expert. In particular, we show that a menu guarantees the traded signal if and only if it can be appropriately decomposed into a fixed and a variable compensation. We then show that for each such menu, the expert’s surplus depends on the fixed compensation, and characterize the lower bound of the expert’s surplus. In particular, this lower bound is strictly positive. This is true even in ideal settings for the buyer (e.g., when the buyer has all the strategic power, and a fortiori the fixed compensation is minimized).