Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers

37 Pages Posted: 13 Apr 2006 Last revised: 23 Aug 2010

See all articles by V. Joseph Hotz

V. Joseph Hotz

Duke University; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Mo Xiao

University of Arizona - Eller College of Management - Department of Economics

Date Written: January 2006

Abstract

We examine the incentives for firms to voluntarily disclose otherwise private information about the quality attributes of their products. In particular, we focus on the case of differentiated products with multiple attributes and heterogeneous consumers. We show that there exist certain configurations of consumers' multi-dimensional preferences under which a firm, no matter whether producing a high- or low-quality product, may choose not to reveal the quality even with zero disclosure costs. The failure of information unraveling arises when providing consumers with more information results in more elastic demand, which triggers more intensive price competition and leads to lower prices and profits for competing firms. As a result, the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory.

Suggested Citation

Hotz, V. Joseph and Xiao, Mo, Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers (January 2006). NBER Working Paper No. w11937. Available at SSRN: https://ssrn.com/abstract=876039

V. Joseph Hotz (Contact Author)

Duke University ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708
United States
919-660-1841 (Phone)
919-684-8974 (Fax)

HOME PAGE: http://www.econ.duke.edu/~vjh3

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Mo Xiao

University of Arizona - Eller College of Management - Department of Economics ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
48
Abstract Views
710
PlumX Metrics