Benign vs. Self-Serving Information Reduction: Do Individuals Understand the Difference?

21 Pages Posted: 30 May 2019

See all articles by Alexander L. Brown

Alexander L. Brown

Texas A&M University - Department of Economics

Daniel E. Fragiadakis

Villanova University - Department of Economics

Date Written: May 7, 2019

Abstract

To ease consumer choice, regulators often require producers to make standardized and comparable disclosures over key product attributes. At the same time, product advertising may emphasize similar comparisons, albeit over strategically chosen attributes. We show that individuals may conflate these two cases; largely failing to understand that self-serving disclosures are uninformative, they are consequently exploited by producers. The fallacy is not due to consumer naiveté regarding producer behavior; rather, subjects incorrectly adjust prior beliefs in response to strategically disclosed information. Thus, for the boundedly rational to benefit from reduced information loads, limited disclosures must be independent of other parties' motives.

Suggested Citation

Brown, Alexander L. and Fragiadakis, Daniel E., Benign vs. Self-Serving Information Reduction: Do Individuals Understand the Difference? (May 7, 2019). Available at SSRN: https://ssrn.com/abstract=3384204 or http://dx.doi.org/10.2139/ssrn.3384204

Alexander L. Brown

Texas A&M University - Department of Economics ( email )

4228 TAMU
College Station, TX 77843-4228
United States
979-862-8084 (Phone)
979-847-8757 (Fax)

HOME PAGE: http://econweb.tamu.edu/abrown/

Daniel E. Fragiadakis (Contact Author)

Villanova University - Department of Economics ( email )

800 E. Lancaster Ave
Villanova, PA 19085
United States

HOME PAGE: http://https://sites.google.com/site/danielfragiadakis/

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