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Pre-sale information

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Author Info

  • Hoffmann, Florian
  • Inderst, Roman

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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0022053111001426
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 146 (2011)
Issue (Month): 6 ()
Pages: 2333-2355

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Handle: RePEc:eee:jetheo:v:146:y:2011:i:6:p:2333-2355

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Price discrimination; Single crossing; Information;

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References

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  10. Jullien, Bruno, 1997. "Participation Constraints in Adverse Selection Models," IDEI Working Papers 67, Institut d'Économie Industrielle (IDEI), Toulouse.
  11. David P. Myatt & Justin P. Johnson, 2004. "On the Simple Economics of Advertising, Marketing, and Product Design," Economics Series Working Papers 185, University of Oxford, Department of Economics.
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Citations

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Cited by:
  1. Daniel Krähmer & Roland Strausz, 2014. "Ex Post Information Rents in Sequential Screening," CESifo Working Paper Series 4739, CESifo Group Munich.
  2. Krähmer, Daniel & Strausz, Roland, 2013. "Ex post information rents and disclosure in sequential screening," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 406, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Kovác, Eugen & Krähmer, Daniel, 2013. "Optimal Sequential Delegation," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 427, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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