Competing Through Information Provision∗

This paper studies the symmetric equilibria of a two-buyer, two-seller model of directed search in which sellers commit to information provision. More informed buyers have better differentiated private valuations and extract higher rents from trade. I establish how the characteristics of exogenously fixed sale mechanisms determine equilibrium information provision and show that competition generates complementarities between allocative and informational efficiency. Information provision is higher under competition than under monopoly, yet partial information is provided for many natural sale mechanisms. In contrast, when sellers commit to both information provision and sale mechanisms, I identify simple conditions under which every equilibrium has full information. Sellers capture the efficiency gains from increased information and compete only over non-distortionary rents offered to buyers. JEL Classification: C72, D43, D44, D82