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A Note on Quality Disclosure and Competition

Author

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  • Jos Jansen

    (Department of Economics and Business Economics, Aarhus University, Denmark)

Abstract

Competitive pressure is lower in markets where goods are more differentiated. I analyze how a change in the degree of horizontal product differentiation affects the incentives of duopolists to disclose quality information. If disclosure is costly, then a firm discloses high qualities but conceals low qualities in equilibrium. The higher the disclosure cost, the higher the equilibrium threshold below which firms conceal quality information. I show that the effect of product differentiation on quality disclosure depends on the cost of disclosure. For low (high) disclosure costs, a firm discloses more (less) quality information if goods become more differentiated.

Suggested Citation

  • Jos Jansen, 2015. "A Note on Quality Disclosure and Competition," Economics Working Papers 2015-15, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2015-15
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    File URL: https://repec.econ.au.dk/repec/afn/wp/15/wp15_15.pdf
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    Citations

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    Cited by:

    1. Xun Bian & Justin C. Contat & Bennie D. Waller & Scott A. Wentland, 2023. "Why Disclose Less Information? Toward Resolving a Disclosure Puzzle in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 443-486, February.

    More about this item

    Keywords

    Hotelling model; quality; transportation cost; product differentiation; information disclosure; disclosure cost; competitive pressure;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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