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Quality Disclosure And Competition

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  • DAN LEVIN
  • JAMES PECK
  • LIXIN YE

Abstract

We analyze costly quality disclosure with horizontally differentiated products under duopoly and a cartel, and characterize the effect of competition on disclosure and welfare. We show that expected disclosure is higher under a cartel than under duopoly, and the welfare comparison depends on the level of disclosure cost: when the disclosure cost is low, welfare is higher under a cartel than duopoly, but when the disclosure cost is high, welfare is higher under duopoly. In either market structure, disclosure is excessive in terms of total surplus, but insufficient in terms of consumer surplus.

Suggested Citation

  • Dan Levin & James Peck & Lixin Ye, 2009. "Quality Disclosure And Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 167-196, March.
    • Handle: RePEc:bla:jindec:v:57:y:2009:i:1:p:167-196
    DOI: 10.1111/j.1467-6451.2009.00366.x
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    References listed on IDEAS

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