Product Use Information and the Limits of Voluntary Disclosure

Abstract:     
Concern about asymmetric information in markets for consumer goods and services has focused on product attribute information. We highlight the importance of another category of information - product use information. In important markets, sellers have better information about how a consumer will use their product or service than the consumer herself. Moreover, we show that the classic unraveling results do not extend to product use information, and thus sellers are less likely to voluntarily disclose this type of information. Our findings have important policy implications: While most disclosure mandates target product attribute information, our analysis suggests that mandating disclosure of product use information may be more important. Indeed, policymakers are beginning to recognize the importance of product use disclosures.

Number of Pages in PDF File: 38

working papers series