Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers
AbstractWe 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11937.
Date of creation: Jan 2006
Date of revision:
Publication status: published as V. Joseph Hotz & Mo Xiao, 2013. "Strategic Information Disclosure: The Case Of Multiattribute Products With Heterogeneous Consumers," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 865-881, 01.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- V. Joseph Hotz & Mo Xiao, 2013. "Strategic Information Disclosure: The Case Of Multiattribute Products With Heterogeneous Consumers," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 865-881, 01.
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L5 - Industrial Organization - - Regulation and Industrial Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-COM-2006-01-24 (Industrial Competition)
- NEP-MIC-2006-01-24 (Microeconomics)
- NEP-MKT-2006-01-24 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 63-81, January.
- Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979.
"Price competition, quality and income disparities,"
Journal of Economic Theory,
Elsevier, vol. 20(3), pages 340-359, June.
- Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," CORE Discussion Papers 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dye, Ronald A, 1986. "Proprietary and Nonproprietary Disclosures," The Journal of Business, University of Chicago Press, vol. 59(2), pages 331-66, April.
- Ginger Zhe Jin & Phillip Leslie, 2003. "The Effect Of Information On Product Quality: Evidence From Restaurant Hygiene Grade Cards," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 409-451, May.
- Michael J. Fishman & Kathleen M. Hagerty, 2003. "Mandatory Versus Voluntary Disclosure in Markets with Informed and Uninformed Customers," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 45-63, April.
- Paul R. Milgrom, 1979.
"Good Nevs and Bad News: Representation Theorems and Applications,"
407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
- Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
- Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Gal-Or, Esther, 1986. "Information Transmission-Cournot and Bertrand Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 85-92, January.
- Oliver Board, 2009. "COMPETITION AND DISCLOSURE -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 197-213, 03.
- Peters, Michael, 1984. "Restrictions on Price Advertising," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 472-85, June.
- Mathios, Alan D, 2000. "The Impact of Mandatory Disclosure Laws on Product Choices: An Analysis of the Salad Dressing Market," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 651-77, October.
- 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.
- Neven, Damien J., 1986.
"On Hotelling's competition with non-uniform customer distributions,"
Elsevier, vol. 21(2), pages 121-126.
- Neven, D., 1985. "On hotelling’s competition with non uniform customer distributions," CORE Discussion Papers 1985044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Joseph Farrell, 1985. "Voluntary Disclosure: Robustness of the Unraveling Result, and Comments on Its Importance," Working papers 374, Massachusetts Institute of Technology (MIT), Department of Economics.
- Insuk Cheong & Jeong-Yoo Kim, 2004. "Costly Information Disclosure in Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 121-132, 03.
- Stivers Andrew E, 2004. "Unraveling of Information: Competition and Uncertainty," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-18, December.
- Daniel Halbheer & Florian Stahl & Oded Koenigsberg & Donald R. Lehmann, 2013. "Digital Content Strategies," Working Papers 329, University of Zurich, Department of Business Administration (IBW).
- Xiao, Mo, 2010. "Is quality accreditation effective? Evidence from the childcare market," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 708-721, November.
- Seth Freedman & Melissa Kearney & Mara Lederman, 2012.
"Product Recalls, Imperfect Information, and Spillover Effects: Lessons from the Consumer Response to the 2007 Toy Recalls,"
The Review of Economics and Statistics,
MIT Press, vol. 94(2), pages 499-516, May.
- Seth M. Freedman & Melissa Schettini Kearney & Mara Lederman, 2009. "Product Recalls, Imperfect Information, and Spillover Effects: Lessons from the Consumer Response to the 2007 Toy Recalls," NBER Working Papers 15183, National Bureau of Economic Research, Inc.
If references are entirely missing, you can add them using this form.