Quality disclosure with information value under competition

  • Yanfei Lan
  • Jin Peng
  • Fengwu Wang
  • Changshui Gao
Original Article


In this paper, a new influence factor, called information value, is introduced to examine the question of voluntary quality disclosure. As a benchmark, we first consider a monopolistic case. The seller’s equilibrium disclosure strategy and ex ante utility are obtained, respectively. The result shows that the information value is of special stimulation to sellers disclosure, since it can counteract the disclosure cost partly. Then two duopoly cases, containing a simultaneous disclosure case and a sequential disclosure case, are considered, respectively. The result indicates that the seller discloses less information than that in the monopolistic case due to competition. Moreover, compared to the simultaneous disclosure case, in the sequential disclosure case, competition is softened and both sellers’ utilities and the social welfare are improved, but at the cost of sacrificing the consumer’s surplus. Benefiting from the competition, the social welfare and the consumer’s surplus are both bigger than that in the monopolistic case, yet the seller’s utility is smaller.


Quality disclosure Information value Disclosure cost Competition 



This work was supported partially by the Natural Science Foundation of China under Grant Nos. 71301114, 71271151 and 71471126, the Research Fund for the Specialized Research Fund for the Doctoral Program of Higher Education under Grant No. 20130032110015 and the Projects of the Humanity and Social Science Foundation of Ministry of Education of China under Grant No. 13YJA630065.


  1. 1.
    Ashfaq RAR, Wang XZ, Huang JZX, Abbas H, He YL (2017) Fuzziness based semi-supervised learning approach for intrusion detection system. Inf Sci 378:484–497CrossRefGoogle Scholar
  2. 2.
    Bawa K, Shoemaker R (2004) The effects of free sample promotions on incremental brand sales. Mark Sci 23(3):345–363CrossRefGoogle Scholar
  3. 3.
    Board O (2009) Competition and disclosure. J Ind Econ 57(1):197–213MathSciNetCrossRefGoogle Scholar
  4. 4.
    Caldieraro F, Shin D, Stivers A (2011) Voluntary quality disclosure under price-signaling competition. Manag Decis Econ 32(8):493–504CrossRefGoogle Scholar
  5. 5.
    Cheong I, Kim JY (2004) Costly information disclosure in oligopoly. J Ind Econ 52(1):121–132CrossRefGoogle Scholar
  6. 6.
    Chen Y, Xie J (2008) Online consumer review: word-of-mouth as a new element of marketing communication mix. Manag Sci 54(3):477–491CrossRefGoogle Scholar
  7. 7.
    Daughety AF, Reinganum JF (2008) Communicating quality: a unified model of disclosure and signaling. Rand J Econ 39(4):973–989CrossRefGoogle Scholar
  8. 8.
    Dellarocas C (2003) The digitization of word of mouth: promise and challenges of online feedback mechanisms. Manag Sci 49(10):1401–1424CrossRefGoogle Scholar
  9. 9.
    Farrell J (1986) Voluntary disclosure: robustness of the unravelling result. In: Grieson R (ed) Antitrust and regulation. Lexington Books, Lanham, pp 91–103Google Scholar
  10. 10.
    Fishman MJ, Hagerty KM (2003) Mandatory versus voluntary disclosure in markets with informed and uninformed customers. J Law Econ Org 19(1):45–63CrossRefGoogle Scholar
  11. 11.
    Grossman SJ (1981) The informational role of warranties and private disclosure about product quality. J Law Econ 24(3):416–483CrossRefGoogle Scholar
  12. 12.
    Grossman SJ, Hart OD (1980) Disclosure laws and takeover bids. J Finance 35(2):323–334CrossRefGoogle Scholar
  13. 13.
    Guo L, Zhao Y (2009) Voluntary quality disclosure and market interaction. Mark Sci 28(3):488–501MathSciNetCrossRefGoogle Scholar
  14. 14.
    Guo L (2009) Quality disclosure formats in a distribution channel. Manag Sci 55(9):1513–1526CrossRefGoogle Scholar
  15. 15.
    He YL, Wang XZ, Huang JZX (2016) Fuzzy nonlinear regression analysis using a random weight network. Inf Sci 364–365:222–240CrossRefGoogle Scholar
  16. 16.
    He YL, Liu JNK, Hu YH, Wang XZ (2015) OWA operator based link prediction ensemble for social network. Expert Syst Appl 42(1):21–50CrossRefGoogle Scholar
  17. 17.
    Hotz VJ, Xiao M (2013) Strategic information disclosure: the case of multi-attribute products with heterogeneous consumers. Econ Inq 51(1):865–881CrossRefGoogle Scholar
  18. 18.
    Janssen M, Roy S (2011) Strategic disclosure and signaling of product quality with price competition. Working paperGoogle Scholar
  19. 19.
    Jovanovic B (1982) Truthful disclosure of information. Bell J Econ 13(1):36–44CrossRefGoogle Scholar
  20. 20.
    Levin D, Peck J, Ye L (2009) Quality disclosure and competition. J Ind Econ 57(1):169–196CrossRefGoogle Scholar
  21. 21.
    Matthews S, Postlewaite A (1985) Quality testing and disclosure. Rand J Econ 16(3):328–340CrossRefGoogle Scholar
  22. 22.
    Mayzlin D (2006) Promotional chat on the Internet. Market Sci 25(2):155–163CrossRefGoogle Scholar
  23. 23.
    Milgrom PR (1981) Good news and bad news representation theorems and applications. Bell J Econ 12(2):380–391CrossRefGoogle Scholar
  24. 24.
    Okuno-Fujiwara M, Postlewaite A, Suzumura K (1990) Strategic information revelation. Rev Econ Stud 57(1):25–47MathSciNetCrossRefzbMATHGoogle Scholar
  25. 25.
    Shavell S (1994) Acquisition and disclosure of information prior to sale. Rand J Econ 25(1):20–36CrossRefGoogle Scholar
  26. 26.
    Stivers AE (2004) Unraveling of information: competition and uncertainty. BE J Theor Econ 4(1):1–9MathSciNetGoogle Scholar
  27. 27.
    Viscusi WK (1978) A note on lemons markets with quality certification. Bell J Econ 9(1):277–279CrossRefGoogle Scholar
  28. 28.
    Wu J, Zhai X, Zhang C, Liu X (2011) Sharing quality information in a dual-supplier network: a game theoretic perspective. Int J Prod Res 49(1):199–214CrossRefzbMATHGoogle Scholar
  29. 29.
    Wang XZ (2015) Learning from big data with uncertainty-editorial. J Intell Fuzzy Syst 28(5):2329–2330MathSciNetCrossRefGoogle Scholar
  30. 30.
    Wang XZ, Ashfaq R, Fu A (2015) Fuzziness based sample categorization for classifier performance improvement. J Intell Fuzzy Syst 29(3):1185–1196MathSciNetCrossRefGoogle Scholar
  31. 31.
    Xiao T, Yang D, Shen H (2011) Coordinating a supply chain with a quality assurance policy via a revenue-sharing contract. Int J Prod Res 9(1):277–279zbMATHGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  • Yanfei Lan
    • 1
  • Jin Peng
    • 2
  • Fengwu Wang
    • 1
  • Changshui Gao
    • 3
  1. 1.Institute of Systems EngineeringTianjin UniversityTianjinChina
  2. 2.Institute of Uncertain SystemsHuanggang Normal UniversityHubeiChina
  3. 3.Ministry of Industry and Information TechnologyBeijingChina

Personalised recommendations