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Rivalry information acquisition and disclosure

Author

Listed:
  • Li X.
  • Peeters R.J.A.P.

    (GSBE)

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 firms 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
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    References listed on IDEAS

    as
    1. 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.
    2. Insuk Cheong & Jeong-Yoo Kim, 2004. "Costly Information Disclosure in Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 121-132, March.
    3. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Communicating quality: a unified model of disclosure and signalling," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 973-989.
    4. Boyan Jovanovic, 1982. "Truthful Disclosure of Information," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 36-44, Spring.
    5. Oliver Board, 2009. "COMPETITION AND DISCLOSURE -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 197-213, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection; Information and Product Quality; Standardization and Compatibility; Enterprise Policy;

    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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