Persuading Customers to Buy Early: The Value of Personalized Information Provisioning

We study a pricing and information provisioning game between a better-informed seller (such as a retailer) and its customers. The seller is (ex post) better informed about product availability and can choose how to communicate this information to the customers. The customers are heterogeneous in their valuation for the product. The firm optimizes on publicly posted prices (which are the same for all customers) and its information provisioning (which can be personalized). Using a Bayesian persuasion framework, we find that public information provisioning, in which the firm sends the same information to all customers, has limited value. However, personalized information provisioning, in which the firm can share different information with different customers, has significant value and has attributes very similar to personalized pricing.

Automated summary

The study suggests that companies should adopt a personalized strategy in information provisioning rather than a one-size-fits-all approach. Such personalized information provisioning strategy has significant value and attributes very similar to personalized pricing.