Strategic signaling for selling information goods

This paper studies the benefit in using signaling by an information seller holding information that can completely disambiguate some uncertainty concerning the state of the world for the information buyer. We show that a necessary condition for having the information seller benefit from signaling in this model is having some “seed of truth” in the signaling scheme used. We then introduce two natural signaling mechanisms that adhere to this condition, one where the seller pre-commits to the signaling scheme to be used and the other where she commits to use a signaling scheme that contains a “seed of truth”. Finally, we analyze the equilibrium resulting from each and show that, somehow counter-intuitively, despite the inherent differences between the two mechanisms, they are equivalent in the sense that for any equilibrium associated with the maximum revenue in one there is an equilibrium offering the seller the same revenue in the other.