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The Cost of Information: The Case of Constant Marginal Costs

Resource type
Authors/contributors
Title
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.
Publication
American Economic Review
Volume
113
Issue
5
Pages
1360-93
Date
2023-05
Citation
Pomatto, L., Strack, P., & Tamuz, O. (2023). The Cost of Information: The Case of Constant Marginal Costs. American Economic Review, 113, 1360–1393.
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