Information Gathering and Marketing

Abstract

Consumers have only partial knowledge before making a purchase decision, but can acquire more-detailed information. Marketing makes it easier or harder for these consumers to do so. When consumers are ex ante heterogeneous, the firm might choose an intermediate marketing strategy for two quite different reasons. First, as a nonprice 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 ensuring quality, the marketing and pricing strategy can act as a commitment device.

Note: Added submission date (NEG 5/28/10).