Consumer‐Minded Informational Intermediary and Welfare Losses

This article examines the welfare implications of third‐party informational intermediation. A seller sets the price of a product that is sold through an intermediary, who discloses information about the product to consumers. In a model where the intermediary is consumer‐minded—has a payoff that depends on both the seller's revenue and the consumer surplus, we show that total welfare may decrease in the Pareto sense, as the intermediary's consumer‐mindedness increases . Furthermore, we show that consumer‐mindedness emerges endogenously when a revenue‐maximizing intermediary is forward‐looking and the consumer base is increasing in past consumer surplus.