Communicating Attribute Importance Under Competition

When consumers encounter unfamiliar products, they often face difficulty in understanding which attributes are crucial, leading to challenges in product comparison and potential diminished interest in the category. This study examines how firms strategically communicate the importance of product attributes in a competitive environment. Despite consumer awareness of attributes and their levels, uncertainty regarding their relative importance remains. We analyze a situation where two firms each receive a noisy signal about the true importance of the attribute and communicate to consumers through cheap-talk messages. Following these communications, consumers decide whether to incur a cost to explore the category by visiting stores. Our findings reveal a truthful equilibrium in which firms report their received signals honestly. In this equilibrium, firms can credibly convey information about the most important attribute if their messages align, thus encouraging store visits and purchases. Interestingly, firms may still find it advantageous to truthfully highlight an attribute, even if it does not align with their competitive advantage. Moreover, we show that without competition (i.e., a single firm communicating), this truthful equilibrium does not exist. Thus, the presence of competition enables the credible communication of information about attribute importance, benefiting both firms by enhancing consumer engagement with the product category.