Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers / V. Joseph Hotz, Mo Xiao.

Format:

Book

Author/Creator:

Hotz, V. Joseph.

Contributor:

National Bureau of Economic Research.

Xiao, Mo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11937.

NBER working paper series no. w11937

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Strategic Information Disclosure

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

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 high- or 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.

Notes:

Print version record

January 2006.