Department of Economics and Business Economics

A Note on Quality Disclosure and Competition

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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.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages9
Publication statusPublished - 3 Aug 2015
SeriesEconomics Working Papers
Number2015-15

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