American Economic Review Vol. 113 No. 5 2023
The Cost of Information: The Case of Constant Marginal Costs
Abstract
We develop an axiomatic theory of information acquisition that captures the idea of constant marginal costs in information production: the cost of generating two independent signals is the sum of their costs, and generating a signal with probability half costs half its original cost. Together with Blackwell monotonicity and a continuity condition, these axioms determine the cost of a signal up to a vector of parameters. These parameters have a clear economic interpretation and determine the difficulty of distinguishing states.
- DOI
- 10.1257/aer.20190185
- Volume
- 113
- Issue
- 5
- Pages
- 1360-1393
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref