Product-Use Information and the Limits of Voluntary Disclosure

Concern about asymmetric information in markets for consumer goods and services has focused on product-attribute information. We highlight the importance of another category of information--product-use information. In important markets, sellers have better information about how a consumer will use their product or service than the consumer herself. Moreover, we show that the classic unraveling results do not extend to product-use information, and thus sellers are less likely to voluntarily disclose this type of information. Our findings have important policy implications: While most disclosure mandates target product-attribute information, our analysis suggests that mandating disclosure of product-use information may be more important. Indeed, policy makers are beginning to recognize the importance of product-use disclosures. Copyright 2012, Oxford University Press.