Review of Industrial Organization

, Volume 44, Issue 2, pp 161–178 | Cite as

A More General Framework to Analyze Whether Voluntary Disclosure is Insufficient or Excessive

Article
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Abstract

I analyze if the excessive quality disclosure finding of the “classical literature” extends to environments in which consumers have a downward-sloping demand. While the answer is affirmative, there are at least two situations under which disclosure is socially insufficient: (1) when there are quality levels that are too low to generate any positive demand; and (2) when the prior beliefs place sufficiently higher weight on lower qualities. In both cases, non-disclosure by the seller leads to a severe reduction in the perceived quality, thereby significantly lowering the demand and the quantity consumed.

Keywords

Monopoly Quality uncertainty Verifiable information disclosure 

JEL Classification

D82 D83 L12 L15 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.CERGE-EI (a joint workplace of Charles University and the Economics Institute of the Academy of Sciences of the Czech Republic)Prague 1Czech Republic

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