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Voluntary Quality Disclosure and Market Interaction


  • Liang Guo

    () (Department of Marketing, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong, China)

  • Ying Zhao

    () (Department of Marketing, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong, China)


Marketers disclose quality information directly to potential consumers using a variety of communication channels. This study investigates how competition may influence duopoly firms' incentive to voluntarily reveal quality information. We show that firms in competitive markets reveal less information than a monopoly firm. In addition, sequential disclosure leads to asymmetric equilibrium disclosure behavior: the disclosure leader reveals unambiguously less information than in the simultaneous disclosure case, whereas the follower ex ante reveals less (more) private information than that released by the leader or by the firms in the simultaneous case when the disclosure cost is sufficiently low (high). We also examine the equilibrium firm profits and social welfare. We demonstrate that there may be a relationship between equilibrium monopoly profits (or social welfare under both monopoly and duopoly) and the disclosure cost. Moreover, in comparison to the simultaneous disclosure case, sequential disclosure can lead to increasingly softened competition, improving both firm profitability and social welfare.

Suggested Citation

  • Liang Guo & Ying Zhao, 2009. "Voluntary Quality Disclosure and Market Interaction," Marketing Science, INFORMS, vol. 28(3), pages 488-501, 05-06.
  • Handle: RePEc:inm:ormksc:v:28:y:2009:i:3:p:488-501

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    1. Konrad Stahl & Roland Strausz, 2017. "Certification and Market Transparency," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1842-1868.
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    5. Juanjuan Zhang, 2010. "The Sound of Silence: Observational Learning in the U.S. Kidney Market," Marketing Science, INFORMS, vol. 29(2), pages 315-335, 03-04.
    6. Liang Guo, 2009. "Quality Disclosure Formats in a Distribution Channel," Management Science, INFORMS, vol. 55(9), pages 1513-1526, September.
    7. Rick Harbaugh & John W. Maxwell & Beatrice Roussillon, 2011. "Label Confusion: The Groucho Effect of Uncertain Standards," Management Science, INFORMS, vol. 57(9), pages 1512-1527, February.
    8. Anderson, Simon P. & Ciliberto, Federico & Liaukonyte, Jura, 2013. "Information content of advertising: Empirical evidence from the OTC analgesic industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 355-367.
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