Year: 2004
Type: article
Abstract: We examine the effect of competition on the incentive of firms to disclose quality to consumers before trade when information disclosure is not costless. We demonstrate that no firm will disclose information in the limit, no matter how small the disclosure cost is; that is, the market outcome converges to complete concealment of information as the number of competing firms becomes larger. Nonetheless, it can be shown that under a mild condition, the equilibrium amount of information disclosure is socially excessive for any number of firms, so discouraging information disclosure by levying a tax may increase social welfare.
Source: Journal of Industrial Economics
Authors: Insuk Cheong, Jeong‐Yoo Kim
Institutions: Hankuk University of Foreign Studies, Kyung Hee University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2170904840