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Optimal information acquisition for firm decisions

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This paper examines firms' optimal resource allocation to acquire information using a game-theoretic model of firms that face cost and demand uncertainty. The optimal resource allocation raquires two kinds of tradeoffs. First, firms must decide whether cost or demand information is more valuable for decision making. Second, they must decide whether detailed information about one of them is more valuable than broad information about both of them. A better understanding of what data firms should process is important for helping them to better manage their information assets and for studying actual firm behavior. Moreover, insights about "customer behavior" are of value to data sellers. The main finding of this paper is that often firms should prefer detailed information to broad information, in particular when uncertainty is limited, competition is high, and firms' effectiveness in processing data into information is high

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp1997/97-106.pdf

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Copyright INSEAD. All rights reserved