Manipulation by Mislaid Priorities
Harvard Law School John M. Olin Center Discussion Paper No. 1063
51 Pages Posted: 1 Jun 2021
Date Written: May 29, 2021
This paper lays a foundation for a new theory of manipulation, based on the misprioritization of (truthful) information. Since consumers review only a subset of all available information, firms can harm consumers by prioritizing information that maximizes firms’ profits but has a smaller impact on the utility that consumers stand to gain from the purchase. Moreover, the distortions due to misprioritized information can arise not only from firms’ boastful disclosures, but also from the warnings and disclosures mandated by lawmakers. The paper identifies the product and market characteristics that determine the optimal prioritization of information and, correspondingly, the incidence of harm when the wrong information is prioritized for disclosure—either voluntarily by sellers or by legal mandate. It provides a framework for optimal legal intervention.
Keywords: Manipualtion, Asymmetric information, Consumer markets, Disclosure
JEL Classification: D11, D18, D82, D83, D91, K20, L15
Suggested Citation: Suggested Citation