Pre-sale information

Florian Hoffmann and Roman Inderst

Journal of Economic Theory, 2011, vol. 146, issue 6, 2333-2355

Abstract: In markets as diverse as that for specialized industrial equipment or that for retail financial services, sellers or intermediaries may earn profits both from the sale of products and from the provision of pre-sale consultation services. We study how a seller optimally chooses the costly quality of pre-sale information, next to the price of information and the product price, and obtain clear-cut predictions on when information is over- and when it is underprovided, even though we find that information quality does not satisfy a standard single-crossing property. Buyers who are a priori more optimistic about their valuation end up paying a higher margin for information but a lower margin for the product when they subsequently exercise their option to purchase at a pre-specified price.

Keywords: Price discrimination; Single crossing; Information (search for similar items in EconPapers)
JEL-codes: D42 D82 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:146:y:2011:i:6:p:2333-2355

DOI: 10.1016/j.jet.2011.10.009

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