The Advertising Effect Of Sales Data

In this paper, we discuss the incentive for a firm to reveal its sales data, and under what specific conditions will a firm reveal its sales data.In our two-period monopoly model, sales data, as an aggregation of past consumer purchases, contains information about product quality, so it is valuable for future consumers to improve their information and make more precise prediction. But sales data is private information of the monopoly, so for profit maximization, the monopoly will consciously choose whether to reveal sales data to influence, even manipulate, consumers'belief of product quality.Three possible strategies for the monopoly are identified:Reveal Strategy, The monopoly promised to reveal sales date for ever; Conceal Strategy, The monopoly promised to conceal sales data for ever; Flexible Strategy, the monopoly doesn't make any decision until it has observed the sales data.These three strategies are examined respectively according to whether consumers acquire extra private information of product quality. The key difference between these two circumstances is whether the monopoly can transmit information with product prices when it has concealed sales data.If consumers don't have private information, the monopoly can't send signals to consumers. Because if consumer believes what the monopoly claims, then the monopoly can mislead consumers by sending wrong signals, and noticing this, consumers will never try to extract information from product prices.If consumers have private information, the result turns the other way. Consumers can trust the signals send by the monopoly, because they can examine these signals with their own information, and if the monopoly tries to fool consumers, it will be punished by the market.We find similar conclusion under these different information structures:1, Wait is always better. The monopoly always prefer flexible strategy to fully utilize its information advantage, so that it can take advantage of good news (against conceal strategy), and get rid of bad news (against reveal strategy). And an extension is that the monopoly will never voluntarily joint a compulsory sales data publication program.2, the chances for the monopoly to reveal sales data increase as the cost of sales data revelation declines. As our tuition implies, the monopoly will decide whether to reveal sales data after comparing the benefit and cost, when the cost is lower, the monopoly is more tend to reveal.3, There is always a possibility that the monopoly won't reveal sales data. No matter how low the cost of sales data revelation is, the monopoly will choose not to reveal it when the sales data implies very bad information on product quality. Then the monopoly find it is better to conceal the sales data, even this move is conspicuous in consumers'eyes.