Possibilities with mechanisms under limited commitment

Abstract

The main purpose of this document is to determine if a firm can capture value through information trading. We limit our efforts to a situation where a firm interacts with a customer in two stages but without any commitment, clearly, the agent is afraid to deliver private information because the firm can use it against him in future interactions and leave no informational rents. A relevant part of the analysis is the idea that a mechanism should encode not only the rules that determine the allocation but also the information available in each stage. We show that under a set of reasonable assumptions and different scenarios, the firm is actually incapable of selling information systems and it is limited to disclosing information through physical allocations. The constant trade-off between giving the agent the optimal menu and how much information the market is able to induce from it tomorrow seems to be enough trouble for the designer, so the absence of additional signals is the best option.