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Rivalry information acquisition and disclosure

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  • Li, X.

    (Microeconomics & Public Economics)

  • Peeters, R.J.A.P.

    (Microeconomics & Public Economics)

Abstract

In the recent past there have been numerous scandals around bad practices in the food industry. Although it can be easily rationalized why these bad practices have not been reported by the inflictors themselves, it is more difficult to understand why the non-inflicting competitors did not report their rivals' conspicuous acts. In this paper we study these competitors' incentives to acquire and to disclose information on the quality of their rivals' products and how regulatory intervention may enhance information disclosure. Our model involves two firms that compete in prices within a differentiated product market, where the quality of one of the firms is publicly known while that of the other firm is unknown. Before the firms set their prices, the former firm has the possibility to acquire information on the quality of the latter firm's product, and, if decided to do so, subsequently, the possibility to credibly reveal this information to the public. We find that low quality levels can be disclosed in a substitute market, but should not be expected to be disclosed in a complement market. Policies that mandate acquisition or disclosure may enhance disclosure of low quality levels, but fail to be welfare enhancing.

Suggested Citation

  • Li, X. & Peeters, R.J.A.P., 2013. "Rivalry information acquisition and disclosure," Research Memorandum 032, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2013032
    DOI: 10.26481/umagsb.2013032
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    Cited by:

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    2. Erica L. Plambeck & Terry A. Taylor, 2019. "Testing by Competitors in Enforcement of Product Standards," Management Science, INFORMS, vol. 65(4), pages 1735-1751, April.
    3. Iwan Bos & Ronald Peeters, 2023. "Price Competition in a Vertizontally Differentiated Duopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(3), pages 219-239, May.
    4. Hong, Xianpei & Cao, Xinlu & Gong, Yeming & Chen, Wanying, 2021. "Quality information acquisition and disclosure with green manufacturing in a closed-loop supply chain," International Journal of Production Economics, Elsevier, vol. 232(C).
    5. Karamarković, Vladan M. & Nikolić, Miloš V. & Karamarković, Rade M. & Karamarković, Miodrag V. & Marašević, Miljan R., 2018. "Techno-economic optimization for two SHPPs that form a combined system," Renewable Energy, Elsevier, vol. 122(C), pages 265-274.
    6. Huan Cao & Xu Guan & Tijun Fan & Li Zhou, 2020. "The Acquisition of Quality Information in a Supply Chain with Voluntary vs. Mandatory Disclosure," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 595-616, March.

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    More about this item

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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