Work

Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers

Year: 2006

Type: report

Abstract: We examine the incentives for firms to voluntarily disclose otherwise private information about the quality attributes of their products.In particular, we focus on the case of differentiated products with multiple attributes and heterogeneous consumers.We show that there exist certain configurations of consumers' multi-dimensional preferences under which a firm, no matter whether producing a highor low-quality product, may choose not to reveal the quality even with zero disclosure costs.The failure of information unraveling arises when providing consumers with more information results in more elastic demand, which triggers more intensive price competition and leads to lower prices and profits for competing firms.As a result, the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory.

Source: National Bureau of Economic Research

DOI: 10.3386/w11937

Authors: V. Joseph Hotz, Mo Xiao

Institutions: National Bureau of Economic Research, University of California, Los Angeles, Duke University, Iowa State University

Language: English

Topic: Consumer Market Behavior and Pricing

Subfield: Marketing

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2890210835

Cites: 36

Cited by: 19

Related to: 10