Paper ID

2017

Description

The optimal provision of free vs. paid information is a key decision for information sellers. Utilizing a dataset from a large online investment advisory platform, we construct and empirically estimate a structural model of demand and supply in a competitive information market. We model demand for paid information as a two-stage process where heterogeneous information seekers first sample free information subject to their attentional constraints in order to form a consideration set and then make their purchase decisions. Consequently, strategic information sellers can provide free information to influence the demand elasticities and market structure in the market of paid information. Our paper contributes to the literature by documenting the interplay between seller competition and consumers’ limited attention in the context of information selling. Our results also guide information sellers to determine the optimal quantity of free vs. paid information.

Share

COinS
 

Selling Information When Attention is Limited: An Empirical Analysis of an Online Investment Advisory Platform

The optimal provision of free vs. paid information is a key decision for information sellers. Utilizing a dataset from a large online investment advisory platform, we construct and empirically estimate a structural model of demand and supply in a competitive information market. We model demand for paid information as a two-stage process where heterogeneous information seekers first sample free information subject to their attentional constraints in order to form a consideration set and then make their purchase decisions. Consequently, strategic information sellers can provide free information to influence the demand elasticities and market structure in the market of paid information. Our paper contributes to the literature by documenting the interplay between seller competition and consumers’ limited attention in the context of information selling. Our results also guide information sellers to determine the optimal quantity of free vs. paid information.