Information Gathering and Marketing

24 Pages Posted: 13 Oct 2008

See all articles by Heski Bar-Isaac

Heski Bar-Isaac

University of Toronto - Rotman School of Management

Guillermo Caruana

Centre for Monetary and Financial Studies (CEMFI)

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group

Multiple version iconThere are 3 versions of this paper

Date Written: April 2008

Abstract

Consumers have only partial knowledge before making a purchase decision, but can choose to acquire more detailed information. A firm can make it easier or harder for these consumers to obtain such information. We explore consumers' information gathering and the firm's integrated strategy for marketing, pricing, and investment in quality. In particular, we highlight that when consumers are ex-ante heterogeneous, the firm might choose an intermediate marketing strategy for two quite different reasons. First, it serves as a non-price means of discrimination - it can make information only partially available, in a way that induces some, but not all, consumers to acquire the information. Second, when the firm cannot commit to a given investment in quality, it can still convince all consumers of its provision by designing a pricing and marketing policy that induces some consumers to actively gather further information. This mass of consumers, in exchange, is sufficiently large to discipline the monopolist to invest in the quality of the product.

Keywords: information gathering, monopoly, marketing, pricing, investment

Suggested Citation

Bar-Isaac, Heski and Caruana, Guillermo and Cuñat, Vicente, Information Gathering and Marketing (April 2008). NYU Working Paper No. EC-08-17. Available at SSRN: https://ssrn.com/abstract=1281909

Heski Bar-Isaac (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416 978 3626 (Phone)

HOME PAGE: http://https://sites.google.com/site/heskibarisaac/home

Guillermo Caruana

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
34 91 429 0551 (Phone)
34 91 429 1056 (Fax)

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://www.vicentecunat.com

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