Selling information for bilateral trade

We study the design and pricing of information by independent information providers for a buyer engaged in a trading relationship with a seller, and examine their welfare implications. While competitive information firms would sell full information about the value of the good, a monopolist supplies limited information in a particularly simple form—often resulting in higher total surplus than under full information, by influencing the seller's pricing decision. If only a single information structure can be offered, it takes a binary threshold form. If the provider can offer a menu of priced information structures before the seller sets a price, he offers a continuum of thresholds, inducing a unit‐elastic demand function for the seller. In both scenarios, the information firm increases total welfare when the seller's production cost is high but reduces it when the cost is low.