Helping Consumers Know Themselves
11 Pages Posted: 18 Jan 2011
Date Written: January 17, 2011
Firms sometimes know more about a consumer's expected usage than the consumer herself. We explore the consequences of this reversal in the information asymmetry. We analyze the consequences of making consumers more informed about themselves. While making consumers more informed decreases their expenditure conditional on a given set of prices, equilibrium prices may increase, offsetting the direct benefit of information. We discuss theoretical and practical issues surrounding so-called RECAP regulation that would require firms to provide each consumer with information about her own usage of the firm's product.
Keywords: disclosure, regulation
JEL Classification: D03, D18, D82
Suggested Citation: Suggested Citation