Uncertain Costs, Information Design, and Total Surplus
Maxim Ivanov*
Building: HEC Montréal - Édifice Hélène-Desmarais
Room: HEC
Date: 2025-05-03 4:00 pm – 4:30 pm
Last modified: 2025-04-19
Abstract
The paper considers a monopoly uncertain about its costs, and studies the impact of cost-related information on the total surplus, defined as a weighted sum of consumer and producer surpluses. The effect of this information can be positive or negative, depending on the properties of the market demand. We provide the necessary and sufficient conditions on the demand under which: optimal information takes a form of lower censorship regardless of the prior distribution of costs and the weights in the total surplus; and full disclosure is optimal. Finally, we fully characterize the demand functions such that the total surplus is linear in cost, meaning that information about cost has no impact on the total surplus.