IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v128y2016icp209-230.html
   My bibliography  Save this article

Information disclosure and consumer awareness

Author

Listed:
  • Li, Sanxi
  • Peitz, Martin
  • Zhao, Xiaojian

Abstract

Whether consumers are aware of potentially adverse product effects is key to private and social incentives to disclose information about undesirable product characteristics. In a monopoly model with a mix of aware and unaware consumers, a larger share of unaware consumers makes information disclosure less likely to occur. Since the firm is not interested in releasing information to unaware consumers, a more precise targeting technology that allows the firm to better keep unaware consumers in the dark leads to more disclosure. A regulator may want to intervene in this market and impose mandatory disclosure rules.

Suggested Citation

  • Li, Sanxi & Peitz, Martin & Zhao, Xiaojian, 2016. "Information disclosure and consumer awareness," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 209-230.
  • Handle: RePEc:eee:jeborg:v:128:y:2016:i:c:p:209-230
    DOI: 10.1016/j.jebo.2016.05.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268116300804
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jean Tirole, 2009. "Cognition and Incomplete Contracts," American Economic Review, American Economic Association, vol. 99(1), pages 265-294, March.
    2. Armstrong, Mark & Porter, Robert, 2007. "Preface to the Handbook of Industrial Organization, Volume 3," Handbook of Industrial Organization, Elsevier.
    3. Masahiro Okuno-Fujiwara & Andrew Postlewaite & Kotaro Suzumura, 1990. "Strategic Information Revelation," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 25-47.
    4. Daughety, Andrew F & Reinganum, Jennifer F, 1995. "Product Safety: Liability, R&D, and Signaling," American Economic Review, American Economic Association, vol. 85(5), pages 1187-1206, December.
    5. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    6. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters,in: Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74 Edward Elgar Publishing.
    7. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, March.
    8. Lola Esteban & Agustín Gil & José Hernández, 2004. "Pricing with Endogenous Direct Advertising in a Monopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(2), pages 129-154, June.
    9. Stefano DellaVigna & Ulrike Malmendier, 2004. "Contract Design and Self-Control: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 353-402.
    10. Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 63-81.
    11. A. Mitchell Polinsky & Steven Shavell, 2012. "Mandatory Versus Voluntary Disclosure of Product Risks," Journal of Law, Economics, and Organization, Oxford University Press, vol. 28(2), pages 360-379.
    12. Galanis, Spyros, 2015. "The value of information under unawareness," Journal of Economic Theory, Elsevier, vol. 157(C), pages 384-396.
    13. Simon P. Anderson & Régis Renault, 2009. "Comparative advertising: disclosing horizontal match information," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 558-581, September.
    14. Grant, Simon & Quiggin, John, 2013. "Bounded awareness, heuristics and the Precautionary Principle," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 17-31.
    15. Filiz-Ozbay, Emel, 2012. "Incorporating unawareness into contract theory," Games and Economic Behavior, Elsevier, vol. 76(1), pages 181-194.
    16. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
    17. Ying-Ju Chen & Xiaojian Zhao, 2013. "Solution Concepts of Principal-Agent Models with Unawareness of Actions," Games, MDPI, Open Access Journal, vol. 4(3), pages 1-24, August.
    18. 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 461-483, December.
    19. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    20. Kfir Eliaz & Ran Spiegler, 2011. "Consideration Sets and Competitive Marketing," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 235-262.
    21. Evans David S., 2008. "The Economics of the Online Advertising Industry," Review of Network Economics, De Gruyter, vol. 7(3), pages 1-33, September.
    22. Avi Goldfarb, 2014. "What is Different About Online Advertising?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 115-129, March.
    23. Ran Spiegler, 2006. "The Market for Quacks," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 1113-1131.
    24. Galeotti, Andrea & Moraga-González, José Luis, 2008. "Segmentation, advertising and prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1106-1119, September.
    25. 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.
    26. Kfir Eliaz & Ran Spiegler, 2006. "Contracting with Diversely Naive Agents," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 689-714.
    27. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Products Liability, Signaling and Disclosure," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 106-126, March.
    28. Steven Matthews & Andrew Postlewaite, 1985. "Quality Testing and Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 328-340, Autumn.
    29. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-1346, December.
    30. repec:dau:papers:123456789/12478 is not listed on IDEAS
    31. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 577-619.
    32. Ganesh Iyer & David Soberman & J. Miguel Villas-Boas, 2005. "The Targeting of Advertising," Marketing Science, INFORMS, vol. 24(3), pages 461-476, May.
    33. Mark Armstrong & Robert Porter (ed.), 2007. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 3, number 1, 00.
    34. Martin Meier & Burkhard Schipper, 2014. "Bayesian games with unawareness and unawareness perfection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 219-249, June.
    35. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
    36. Steven Shavell, 1994. "Acquisition and Disclosure of Information Prior to Sale," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 20-36, Spring.
    37. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
    38. Grossman, S J & Hart, O D, 1980. " Disclosure Laws and Takeover Bids," Journal of Finance, American Finance Association, vol. 35(2), pages 323-334, May.
    39. P. Milgrom., 2009. "What the Seller Won’t Tell You: Persuasion and Disclosure in Markets," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 3.
    40. 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.
    41. Roy, Santanu, 2000. "Strategic segmentation of a market," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1279-1290, December.
    42. Boyan Jovanovic, 1982. "Truthful Disclosure of Information," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 36-44, Spring.
    43. Ernst-Ludwig Von Thadden & Xiaojian Zhao, 2012. "Incentives for Unaware Agents," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 1151-1174.
    44. Ginger Zhe Jin & Phillip Leslie, 2003. "The Effect of Information on Product Quality: Evidence from Restaurant Hygiene Grade Cards," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 409-451.
    45. Auster, Sarah, 2013. "Asymmetric awareness and moral hazard," Games and Economic Behavior, Elsevier, vol. 82(C), pages 503-521.
    46. Esteban, Lola & Gil, Agustin & Hernandez, Jose M, 2001. "Informative Advertising and Optimal Targeting in a Monopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 161-180, June.
    47. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
    48. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Galanis, Spyros, 2016. "The value of information in risk-sharing environments with unawareness," Discussion Paper Series In Economics And Econometrics 1602, Economics Division, School of Social Sciences, University of Southampton.
    2. Haisken-DeNew, John & Hasan, Syed & Jha, Nikhil & Sinning, Mathias, 2018. "Unawareness and selective disclosure: The effect of school quality information on property prices," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 449-464.
    3. Ronelle Burger & Canh Thien Dang & Trudy Owens, 2017. "Better performing NGOs do report more accurately: Evidence from investigating Ugandan NGO financial accounts," Discussion Papers 2017-10, University of Nottingham, CREDIT.
    4. Antoine Dubus, 2017. "Asymmetric Awareness and Heterogeneous Agents," Working Papers hal-01521487, HAL.
    5. Jan Brzozowski & Marco Cucculelli, 2016. "Learning from crisis: a systematic literature review," Mo.Fi.R. Working Papers 123, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    6. Galanis, Spyros, 2016. "The value of information in risk-sharing environments with unawareness," Games and Economic Behavior, Elsevier, vol. 97(C), pages 1-18.
    7. Elisabetta Cornago & Luisa Dressler, 2018. "Incentives to (not) Disclose Energy Performance Information in the Housing Market," Working Papers ECARES 2018-34, ULB -- Universite Libre de Bruxelles.
    8. Zhengqing Gui & Yangguang Huang & Xiaojian Zhao, 2018. "Whom to Educate? Financial Fraud and Investor Awareness," HKUST IEMS Working Paper Series 2018-52, HKUST Institute for Emerging Market Studies, revised Jan 2018.
    9. Bardey, David & Gromb, Denis & Martimort, David & Pouyet, Jérôme, 2019. "Controlling Sellers Who Provide Advice: Regulation and Competition," CEPR Discussion Papers 13543, C.E.P.R. Discussion Papers.
    10. Ismaël Rafaï & Mira Toumi, 2017. "Pay Attention or Be Paid for Attention? Impact of Incentives on Allocation of Attention," GREDEG Working Papers 2017-11, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.

    More about this item

    Keywords

    Information disclosure; Informative advertising; Targeted advertising; Consumer awareness; Behavioral bias; Non-common prior; Consumer protection; Behavioral industrial organization;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:128:y:2016:i:c:p:209-230. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jebo .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.