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The social value of information on product quality

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  • Corts, Kenneth S.

Abstract

In the context of a seller with private information about product quality, I show that revelation of information on product quality is sometimes, but not always, socially valuable. When it is socially valuable, there is generally a tradeoff between the acquisition and revelation of finer, but more costly information and the revelation of coarser, but less costly information. As a result, it can be socially optimal for firms to reveal only coarse private information.

Suggested Citation

  • Corts, Kenneth S., 2014. "The social value of information on product quality," Economics Letters, Elsevier, vol. 122(2), pages 140-143.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:140-143
    DOI: 10.1016/j.econlet.2013.11.003
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    References listed on IDEAS

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    1. W. Kip Viscusi, 1978. "A Note on "Lemons" Markets with Quality Certification," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 277-279, Spring.
    2. A. Mitchell Polinsky & Steven Shavell, 2012. "Mandatory Versus Voluntary Disclosure of Product Risks," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 28(2), pages 360-379.
    3. Kenneth S. Corts, 2013. "Prohibitions on False and Unsubstantiated Claims: Inducing the Acquisition and Revelation of Information through Competition Policy," Journal of Law and Economics, University of Chicago Press, vol. 56(2), pages 453-486.
    4. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-239, March.
    5. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    6. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Cited by:

    1. Aldo Pignataro, 2019. "The effects of loss aversion on deceptive advertising policies," Theory and Decision, Springer, vol. 87(4), pages 451-472, November.
    2. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2015. "How limiting deceptive practices harms consumers," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 611-624, September.
    3. Kemal Kıvanç Aköz & Cemal Eren Arbatli & Levent Celik, 2020. "Manipulation Through Biased Product Reviews," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 591-639, December.

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