A framework for distinguishing between the quantity of information and its quality or type is presented in which information is an indivisible differentiated commodity for which satiation occurs at one unit. Uncountably many types of information are possible which can be costlessly combined by agents. Similarity of information is expressed by a metric which reflects substitution possibilities among different information structures. In the model, traders desire information only because it helps them to maximize state dependent utilities under uncertainty. Then the individual demand for information is well defined, but possibly nonconvex valued because of the indivisibilities.

A model of a large economy in which prices transmit information (about the "state of the world" which is an argument in consumers' utility functions) from more informed to less informed agents is analysed. The basic hypothesis is that the forecast functions of imperfectly informed agents are suitably dispersed. For any such distribution of forecasts, market clearing prices exist. Moreover, there is always an equilibrium in which each agent's expectations are approximately rational.

The relation between perfectly competitive and monopolistically competitive equilibria is analysed for a Bertrand-Edgeworth model of a single market in which capacity constrained firms choose prices as strategies. The market always has a Nash equilibrium in pure or mixed strategies. As the number of firms increases, the corresponding equilibria converge in distribution to a perfectly competitive price. This result provides a justification for perfect competition that is based on an explicit account of price formation. However, monopoly prices persist with a positive but vanishing probability. Regularity or well defined inverse demand functions are not required.