Product Information Provided by Sellers and Platforms

Abstract

Sellers and platforms both supply product information, but their motivation differs: because of network effects and regulation, and to collect more user data, platforms often target consumer welfare. We show that in this context a profit-maximizing seller cannot do better than to preemptively choose full disclosure: if the consumers' learning remains incomplete and admits higher profits than full disclosure, the platform can add information that makes consumers better off at the cost of lower seller profits. Our result has implications for regulation and the division of labor in information disclosure by sellers and platforms.

Keywords: information disclosure, Bayesian persuasion, platforms, regulation

JEL Classification: D42, D82, D83, L51