Strategic information disclosure: The case of multiattribute products with heterogeneous consumers

Published

Journal Article

We examine the incentives for firms to voluntarily disclose otherwise private information about the quality attributes of their products. In particular, we focus on the case of differentiated products with multiple attributes and heterogeneous consumers. We show that there exist certain configurations of consumers' multidimensional preferences under which a firm, no matter whether producing a high- or low-quality product, may choose not to reveal the quality even with zero disclosure costs. The failure of information unraveling arises when providing consumers with more information results in more elastic demand, which triggers more intensive price competition and leads to lower prices and profits for competing firms. As a result, the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory. © 2011 Western Economic Association International.

Full Text

Duke Authors

Cited Authors

  • Hotz, VJ; Xiao, M

Published Date

  • January 1, 2013

Published In

Volume / Issue

  • 51 / 1

Start / End Page

  • 865 - 881

Electronic International Standard Serial Number (EISSN)

  • 1465-7295

International Standard Serial Number (ISSN)

  • 0095-2583

Digital Object Identifier (DOI)

  • 10.1111/j.1465-7295.2010.00340.x

Citation Source

  • Scopus