Providing Data Samples for Free

38 Pages Posted: 29 Jun 2020

See all articles by Kimon Drakopoulos

Kimon Drakopoulos

University of Southern California

Ali Makhdoumi

Fuqua School of Business; Massachusetts Institute of Technology (MIT)

Date Written: May 26, 2020

Abstract

We consider the problem of a data provider (Seller of information) who sells information to a firm (Buyer of information) regarding an unknown (to both parties) state of the world. Traditionally, the literature explores one-round strategies for selling information due to the Seller’s hold-up problem: once a portion of the dataset is released, the Buyer’s estimate improves and as a result the value of the remaining dataset drops. In this paper we show that this intuition is true when the Buyer’s objective is to improve the precision of her estimate. On the other hand, we establish that when the Buyer’s objective is to improve operational decisions (e.g. better pricing decisions on a market with unknown elasticity) and when the Buyer’s initial estimate is misspecified, one-round strategies are outperformed by free-sample selling strategies and dynamic pricing. In particular, we provide conditions under which free sample strategies generate strictly higher revenues than static strategies (with and without strategic Buyers) and provide examples that illustrate the benefit of providing data samples for free.

Keywords: Selling Data Samples, Selling Information, Pricing, Bayesian Learning, Brownian Motion

Suggested Citation

Drakopoulos, Kimon and Makhdoumi, Ali, Providing Data Samples for Free (May 26, 2020). Available at SSRN: https://ssrn.com/abstract=3611003 or http://dx.doi.org/10.2139/ssrn.3611003

Kimon Drakopoulos (Contact Author)

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

Ali Makhdoumi

Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

HOME PAGE: http://https://www.fuqua.duke.edu/faculty/ali-makhdoumi

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
42
Abstract Views
162
PlumX Metrics