Complementarity of Information Products

Abstract

In “Marketing Information: A Competitive Analysis,” Sarvary, M., and P. M. Parker. 1997. “Marketing Information: A Competitive Analysis.” Marketing Science 16 (1): 24–38 (SP (ii) if consumers choose not to purchase any information product, it is assumed that their initial prior variance is 1 (implied by the utility function specification). This internal inconsistency leads to the possibility that when information products are uncorrelated and their variances are close to 1, marginal utility is increasing in the number of products purchased, and hence information products can be complements in their model. We show that if we remove this internal inconsistency, in the parameter space considered by SP this space of parameters requires consumer’s initial prior to be relatively precise and information products to be highly correlated (either positively or negatively).