The optimal private information in single unit monopoly

Saak, Alexander E.

doi:10.1016/j.econlet.2005.12.001

Cited by 13 publications

(9 citation statements)

References 7 publications

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“…Johnson and Myatt (2006), for example, consider information provision to consumers, but work with an aggregate demand function, and, so, do not consider individual consumers' decisions and cannot identify the particular mechanisms that we discuss. Saak (2006) also considers a monopolist's choice of information provision to passive consumers, and shows that the firm would like to provide (ex ante homogeneous) consumers with information that induces their posteriors to be above or below marginal cost. Anand and Shachar (2005) consider the role of advertising in affecting a consumer's beliefs about match quality both theoretically and empirically.…”

Section: Introductionmentioning

confidence: 99%

Information Gathering and Marketing

2008

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Consumers have only partial knowledge before making a purchase decision, but can choose to acquire more detailed information. A …rm can make it easier or harder for these consumers to obtain such information. We explore consumers'information gathering and the …rm's integrated strategy for marketing, pricing, and investment in quality. In particular, we highlight that when consumers are ex-ante heterogeneous, the …rm might choose an intermediate marketing strategy for two quite di¤erent 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 …rm 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 su¢ ciently large to discipline the monopolist to invest in the quality of the product.JEL: D42, D83, L15, M31

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Section: Introductionmentioning

confidence: 99%

Information Gathering and Marketing

2008

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“…1 1 Although Anderson and Renault derive the result while allowing the consumer to acquire information through search, the result still holds if search is ruled out (see Saak, 2006). …”

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confidence: 99%

When does a firm disclose product information?

Koessler

Renault

2012

The RAND J of Economics

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International audienceA firm chooses a price and the product information it discloses to a consumer whose tastes are privately known. We provide a necessary and sufficient condition on the match function for full disclosure to be the unique equilibrium outcome whatever the costs and prior beliefs about product and consumer types. It allows for products with different qualities as well as some horizontal match heterogeneity. With independently distributed product and consumer types, full disclosure is always an equilibrium and a necessary and sufficient equilibrium condition is that all firm types earn at least the full-disclosure profit

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“…This situation is reminiscent of the statement in Chade and Schlee (2002, p. 446) that "the Radner-Stiglitz nonconcavity emerges only by severely constraining the set of information structures available to decision makers." Saak (2006) shows that in a setting with unit demand, a seller with access to costless, general information structures would only allow the buyer to know if her match-value is greater or smaller than the cost of production. Johnson and Myatt (2006) consider restrictions under which the effects of different informational strategies (and marketing strategies in general) can be classified with reference to "rotations" and "shifts" of the demand function.…”

Section: Related Literature the Model Builds Onmentioning

confidence: 99%

“…4 The mutual information is also equal to the difference between the entropy of the hypothetical joint distribution of θ and s corresponding to the marginal distributions, if the two variables were independent, and the entropy of the actual joint distribution; see Cover and Thomas (1991). 5 More generally, the quantity of information provided under the equilibrium strategy in Saak (2006), where information is costless, is equal to r(Q) + r(1 − Q), where Q is the probability of a type with valuation no lower than c. If the valuation of a buyer type is equal to c, the model admits multiple equilibria, corresponding to multiple quantities of information. Bar-Isaac et al (2010) investigate a model in which the seller's marketing strategy determines the cost that the buyers must bear, if they choose to gather information about the product before making their purchase decision.…”

Section: The Modelmentioning

confidence: 99%

Non-neutral information costs with match-value uncertainty

Manduchi

2012

J. Econ.

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This paper investigates a model featuring a monopolist seller and a buyer with an uncertain valuation for the seller's product. The seller chooses an information system which allows the buyer to receive a private signal, potentially correlated with her valuation. No restrictions are imposed on the conditional distributions of the signal; the cost of the information system is proportional to its precision, measured by the mutual information between the distributions of the buyer's valuation and the signal. In equilibrium, the information system trades off the information cost against the losses deriving from a probability of trade that is either "too high," or "too low"-depending on the relative weight of the expected losses resulting from errors of the two typesand sends "non-neutral" signals, typically. Thus, in general, the probability of a correct signal depends on the buyer's actual valuation, and the probability of trade differs from the probability of a valuation exceeding the cost of production. The expected total surplus generated by the exchange is maximized, in equilibrium.

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The optimal private information in single unit monopoly

Cited by 13 publications

References 7 publications

Information Gathering and Marketing

Information Gathering and Marketing

When does a firm disclose product information?

Non-neutral information costs with match-value uncertainty

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