Matthias Lang, University of Munich

"Benefits and Challenges of Ambiguous Product Information"


We analyze the welfare effects of ambiguous product information for an ambiguity-sensitive buyer facing a monopolist. The buyer privately receives information about her valuation and the monopolist makes a price offer. We show that the buyer and the monopolist can strictly benefit from ambiguous information. We identify two main benefits of ambiguous information. Interim pessimism induces the monopolist to lower the price. An ex-ante optimistic buyer expects buying only for high valuations. Lastly, we characterize all combinations of consumer and producer surplus that any ambiguous information can generate. These results suggest a nuanced approach to the regulation of ambiguous information.

Contact person: Johan Lagerlöf