Pricing Diagnostic Information

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Show simple item record Arora, Ashish Fosfuri, Andrea
dc.contributor.other Management Science 2010-02-04T09:20:13Z 2010-02-04T09:20:13Z 2005-01-18
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.language.iso eng
dc.relation.ispartofseries IESE Research Papers
dc.relation.ispartofseries D/778
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.subject.other Pricing
dc.subject.other Diagnostic Information
dc.subject.other Marketing Research
dc.title Pricing Diagnostic Information
dc.type workingPaper
dc.subject.eciencia Empresa
dc.rights.accessRights openAccess 2008-10-27
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