Pricing Diagnostic Information

Arora, Ashish; Fosfuri, Andrea

Publication:
Pricing Diagnostic Information

dc.affiliation.dpto	UC3M. Departamento de Economía de la Empresa	es
dc.contributor.author	Arora, Ashish
dc.contributor.author	Fosfuri, Andrea
dc.contributor.other	Management Science
dc.date.accessioned	2010-02-04T09:20:13Z
dc.date.available	2010-02-04T09:20:13Z
dc.date.issued	2005-01-18
dc.date.modified	2008-10-27
dc.description.abstract	Diagnostic information allows an agent to predict the state of nature about the success of an investment project better than the prior. We analyze the optimal pricing scheme for selling diagnostic information to buyers with different, privately known, ex ante success probability. Investment costs and returns of successful projects are assumed to be the same for all buyers. The value of diagnostic information is the difference in expected payoffs with and without it, and we show that the willingness to pay for diagnostic information is non monotonic in the ex ante success probability. When the information seller can offer only one quality level, and negative payments are not allowed, we find that the optimal menu of (linear) contracts is remarkably simple. A pure royalty is offered to buyers with low ex ante success probability and a pure fixed fee is offered to buyers with high ex ante success probability.
dc.format.mimetype	application/pdf
dc.identifier.uri	https://hdl.handle.net/10016/6735
dc.language.iso	eng
dc.relation.ispartofseries	IESE Research Papers
dc.relation.ispartofseries	D/778
dc.rights	Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRights	open access
dc.rights.uri	http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.eciencia	Empresa
dc.subject.other	Pricing
dc.subject.other	Diagnostic Information
dc.subject.other	Marketing Research
dc.title	Pricing Diagnostic Information
dc.type	working paper	*
dspace.entity.type	Publication