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When Does a Firm Disclose Product Information?

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  • Koessler, Frédéric
  • Renault, Régis
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    Abstract

    A firm chooses a price and the product information it discloses to a consumer whose tastes are privately known. We provide a necessary and sufficient condition on the match function for full disclosure to be the unique equilibrium outcome whatever the costs and prior beliefs about product and consumer types. It allows for products with different qualities as well as some horizontal match heterogeneity. With independently distributed product and consumer types, full disclosure is always an equilibrium and a necessary and sufficient equilibrium condition is that all firm types earn at least the full-disclosure profit.

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    File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/12406/1/StrategicDisclosure110727.pdf
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    Bibliographic Info

    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/12406.

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    Length:
    Date of creation: 2012
    Date of revision:
    Publication status: Published in RAND Journal of Economics, 2012, Vol. 43, no. 4. pp. 630-649.Length: 19 pages
    Handle: RePEc:dau:papers:123456789/12406

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    Web page: http://www.dauphine.fr/en/welcome.html
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    Related research

    Keywords: Belief; Equilibrium; Equilibrium Conditions; Firm; Firms; Information;

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    References

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    1. Marco Ottaviani & Andrea Prat, 2001. "The Value of Public Information in Monopoly," Econometrica, Econometric Society, vol. 69(6), pages 1673-1683, November.
    2. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2006. "Coarse Thinking and Persuasion," NBER Working Papers 12720, National Bureau of Economic Research, Inc.
    3. Luis Rayo & Ilya Segal, 2010. "Optimal Information Disclosure," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 949 - 987.
    4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    5. Grossman, S J & Hart, O D, 1980. " Disclosure Laws and Takeover Bids," Journal of Finance, American Finance Association, vol. 35(2), pages 323-34, May.
    6. Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
    7. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Monic Sun, 2011. "Disclosing Multiple Product Attributes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 195-224, 03.
    9. Giovannoni, Francesco & Seidmann, Daniel J., 2007. "Secrecy, two-sided bias and the value of evidence," Games and Economic Behavior, Elsevier, vol. 59(2), pages 296-315, May.
    10. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
    11. Oliver Board, 2009. "COMPETITION AND DISCLOSURE -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 197-213, 03.
    12. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    13. Saak, Alexander E., 2006. "The optimal private information in single unit monopoly," Economics Letters, Elsevier, vol. 91(2), pages 267-272, May.
    14. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April.
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    Cited by:
    1. Jeanne Hagenbach & Frédéric Koessler & Eduardo Perez-Richet, 2012. "Certifiable Pre-Play Communication: Full Disclosure," PSE Working Papers hal-00753473, HAL.
    2. repec:hal:wpaper:hal-00753473 is not listed on IDEAS

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