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Disclosure of Verifiable Information under Competition: An Experimental Study

Author

Listed:
  • Stefan P. Penczynski

    (School of Economics and Centre for Behavioural and Experimental Social Science, University of East Anglia)

  • Christian Koch

    (Department of Economics, University of Vienna)

  • Sihong Zhang

    (McKinsey & Company, Inc.)

Abstract

This study investigates experimentally information disclosure in settings with and without seller competition. Sellers often choose to report information selec-tively and buyers account for this—even though not fully—by bidding skeptically. As expected, competition increases sellers’ information disclosure but leads, sur-prisingly and replicably, to more buyer na¨ıvety, offsetting the welfare benefits from improved disclosure. A framing effect generates this result: merely describing a situation as competitive rather than monopolistic alters buyer behavior. Akin to the so-called Peltzman effect, buyers seemingly perceive competition as a safer en-vironment to which they behaviorally adapt by abandoning their skepticism. Con-sequently, consumer benefits hinge on perceived competitiveness—a vulnerability firms may leverage to their advantage.

Suggested Citation

  • Stefan P. Penczynski & Christian Koch & Sihong Zhang, 2025. "Disclosure of Verifiable Information under Competition: An Experimental Study," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 25-01, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:wcbess:25-01
    as

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    References listed on IDEAS

    as
    1. P. Milgrom, 2009. "What the Seller Wont Tell You: Persuasion and Disclosure in Markets," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 3.
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    3. 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.
    4. W. Kip Viscusi, 1978. "A Note on "Lemons" Markets with Quality Certification," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 277-279, Spring.
    5. Lv, Jinpeng & Lord, Dominique & Zhang, Yunlong & Chen, Zhi, 2015. "Investigating Peltzman effects in adopting mandatory seat belt laws in the US: Evidence from non-occupant fatalities," Transport Policy, Elsevier, vol. 44(C), pages 58-64.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ying Xue Li & Burkhard Schipper, 2025. "Disclosure under Unawareness: An Experiment," Working Papers 370, University of California, Davis, Department of Economics.

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    More about this item

    Keywords

    Disclosure; verifiable information; competition; Peltzman effect;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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