Information Acquisition Under Providers' Competition

ABSTRACT This paper studies the strategic interactions between two competing information providers and two competing downstream firms. We find that when one provider sets a moderate price and the other a higher price, the firm with more private information tends to acquire additional information to extend its advantage. Conversely, the firm with less private information forgoes further acquisitions, weakening competition. Moreover, symmetric providers have incentives to set asymmetric prices due to heterogeneous firms' inclination to differentiate information sources. Although the competition between providers may increase the firms' information acquisition costs, it can simultaneously mitigate heightened competition between firms.