When does a firm disclose product information?

Authors


  • We thank Justin Johnson, Kathryn Spier, and two anonymous referees for useful comments and suggestions. We also thank seminar participants at the University of Alberta, Bonn (Max Planck Institute), CREST X-LEI, University College Dublin, University College London, HEC Paris, University of Mannheim, Université du Maine, University of Montreal, University of Rome Tor Vergata, University of California, San Diego, University of Southern California, University of Vienna, University of Virginia, the 2010 EARIE Conference, the 2010 CESifo Conference on Applied Microeconomics, the Second Workshop on the Economics of Advertising and Marketing, the Third Transatlantic Theory Workshop, and the Workshop on Information transmission and Persuasion in Games. Koessler thanks CEPREMAP and Renault thanks Institut Universitaire de France for financial support.

Abstract

A firm chooses a price and the product information it discloses to a consumer whose tastes are privately known. We provide a necessary and sufficient condition on the match function for full disclosure to be the unique equilibrium outcome whatever the costs and prior beliefs about product and consumer types. It allows for products with different qualities as well as some horizontal match heterogeneity. With independently distributed product and consumer types, full disclosure is always an equilibrium and a necessary and sufficient equilibrium condition is that all firm types earn at least the full-disclosure profit.

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