Abstract

In this paper, we analyze the value of shared information services, both when they are operated by their members and when they are implemented by a monopoly provider. The value of information is defined as the compensating variation in price that makes a risk-averse agent indifferent between procuring an informative signal or not. We provide investment sharing rules that implement an individually rational Nash bargaining solution and compare this to the situation in which a nonscreening monopolist maximizes profits. We find that any efficient price schedule for information should take into account (1) the agentís confidence in the signal, (2) the project risk, (3) the agentís risk aversion, as well as (4) her wealth and the mean return if at least one of them is quite small. Interestingly, in a cooperative bargaining situation an agentís investment share may either increase or decrease when risk aversion goes up, depending on whether demand for information decreases faster than implicit bargaining power relative to the other agents or vice versa. We further show that even for CARA utilities, there are important wealth effects. Our results, including the definition of a critical Nash network size, provide a benchmark for the value of information that is shared by a group of agents for use in their respective projects and not employed strategically against each other.

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