TY  - JOUR
AU  - Hotz,V. Joseph
AU  - Xiao,Mo
TI  - Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11937
PY  - 2006
Y2  - January 2006
UR  - http://www.nber.org/papers/w11937
L1  - http://www.nber.org/papers/w11937.pdf
N1  - Author contact info:
V. Joseph Hotz
Department of Economics
Box 90097
Duke University
Durham, NC 27708-0097
Tel: 919-660-1841
Fax: 919-684-8974
E-Mail: hotz@econ.duke.edu

Mo Xiao
260 Heady Hall
Iowa State University
Ames, IA 50011-1070
E-Mail: mxiao@email.arizona.edu
AB  - We examine the incentives for firms to voluntarily disclose otherwise private information about the quality attributes of their products. In particular, we focus on the case of differentiated products with multiple attributes and heterogeneous consumers. We show that there exist certain configurations of consumers’ multi-dimensional preferences under which a firm, no matter whether producing a high- or low-quality product, may choose not to reveal the quality even with zero disclosure costs. The failure of information unraveling arises when providing consumers with more information results in more elastic demand, which triggers more intensive price competition and leads to lower prices and profits for competing firms. As a result, the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory.
ER  -