THE VALUE OF INFORMATION ABOUT PRODUCT QUALITY

Both consumers and a monopolist producer are uncertain about a good's quality. I derive conditions under which the value of public informati on about quality will be positive or negative to consumers and the fir m. I find that the firm always prefers more information, but consumers may not. I identify two properties of costs functions that lead to a negative value of information for consumers: increasing returns to sca le and ''sufficiently'' convex marginal costs. If however, demand and cost functions are linear, then consumers always prefer more informati on. I also analyze the aggregate value of information and extensions t o nonmonopolistic markets.