Research

Prediction markets let anyone with information profit by trading on it. I study what this does to the market for information itself. A monopolist intermediary produces information that it can sell to decision makers and also trade on in a Kyle-style prediction market. The market pulls in two directions: prices reveal part of the intermediary’s information, letting buyers free-ride and eroding its sales rents, while trading profits subsidize the cost of producing information. I characterize the intermediary’s profit, decompose welfare across regions of the parameter space, and derive a minimum efficient scale for information production.

We study how supply disruptions interact with monopoly pricing, inventory management, and consumer stockpiling in a continuous-time model. Pre-emption incentives—consumers prefer to stock up before a price hike while the firm prefers to hike before consumers stock up—lead to an equilibrium with gradual stockpiling and endogenous uncertainty over the timing of a price hike, which can trigger a run at the disruption onset. Consumer storage introduces welfare losses from randomized pricing, but can also strengthen the firm’s incentive to hold buffer stock. Rationing, price controls, and reserve mandates can each improve welfare, but only strategic government reserves can implement the social optimum.