Ichihashi, Shota and Smolin, Alexey (2022) Data Collection by an Informed Seller. TSE Working Paper, n. 22-1330

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Abstract

A seller faces a consumer with an uncertain value for the product. The seller has imperfect private information about the value and requests additional data to set the price. The consumer can decline any request. The consumer’s willingness to provide data depends on his belief about the seller’s type which in turn depends on the request. We show that the type uncertainty limits the scope of data collection: All equilibrium payoffs are spanned by fully pooling equilibria in which the seller collects the same data regardless of the type. The seller’s private information lowers efficiency and profits, but benefits the consumer by fueling his skepticism and preventing excessive data collection. Having less private information may enable the seller to collect more data directly from the consumer and may lower the overall consumer welfare.