The social value of information on product quality

- Firms have private information on product quality.
- Revelation of information does not have social value in a baseline model.
- It does have social value under two alternative models.
- In those cases, the gross social value increases in fineness of information.
- This helps ground the large literature on signaling, liability, certification, etc.

In the context of a seller with private information about product quality, I show that revelation of information on product quality is sometimes, but not always, socially valuable. When it is socially valuable, there is generally a tradeoff between the acquisition and revelation of finer, but more costly information and the revelation of coarser, but less costly information. As a result, it can be socially optimal for firms to reveal only coarse private information.