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.

Publication Type:	Article
Additional Information:	This is a post-peer-review, pre-copyedit version of an article published in Review of Industrial Organization. The final authenticated version is available online at: http://dx.doi.org/10.1007/s11151-013-9409-5.
Publisher Keywords:	Monopoly, Quality uncertainty, Verifiable information disclosure
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce
Departments:	School of Policy & Global Affairs > Economics

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