Gathering and Marketing 1 Heski Bar - Isaac Guillermo

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 ensuring 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 ensuring 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 is su¢ ciently large to discipline the monopolist to invest. JEL: D42, D83, L15, M31 Keywords: information gathering, monopoly, marketing, pricing, investment 1We thank the co-editor, two anonymous referees, participants at EARIE 2007 (Valencia), Haas School of Business, Berkeley, IIOC 2007 (Savannah), LSE, Michigan State University, Oxford, Stern Marketing lunch, Stern Micro lunch, University of Sydney, Utah Winter Business Economics Conference, Workshop on the Economics of Advertising and Marketing (Bad Homburg), Simon Anderson, Simon Board, Jim Dana, Andrew Daughety, Hao Li, Regis Renault, and, particularly, Yuk-Fai Fong and Monic Jiayin Sun for detailed and helpful comments. Guillermo Caruana acknowledges the …nancial support of the Spanish Ministry of Science and Innovation through the Consolider-Ingenio 2010 Project “Consolidating Economics.” Contact info: Bar-Isaac: [email protected]; Department of Economics, Stern School of Business, NYU, 44 West 4th street 7-73, NYC, NY 10012 USA; Caruana: caruana@cem….es; Casado del Alisal 5, 28014 Madrid, Spain; and Cuñat: [email protected]; Department of Finance, London School of Economics, Houghton Street, London WC2 2AE, UK.