Incentives of Low-Quality Sellers to Disclose Negative Information
| Autor: | Dmitry Shapiro, David Seung Huh |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
media_common.quotation_subject
TheoryofComputation_GENERAL ComputerApplications_COMPUTERSINOTHERSYSTEMS Product differentiation Competition (economics) Microeconomics Product (business) Cheap talk Willingness to pay ComputingMilieux_COMPUTERSANDSOCIETY Quality (business) Business Monopoly Duopoly media_common |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.3392166 |
| Popis: | The paper studies incentives of low-quality sellers to disclose negative information about their product. We develop a model where one’s quality can be communicated via cheap-talk messages only. This setting limits ability of high-quality sellers to separate as any communication strategy they pursue can be costlessly imitated by low-quality sellers. Two factors that can incentivize low-quality sellers to communicate their quality are buyers’ risk-attitude and competition. Quality disclosure reduces buyers’ risk thereby increasing their willingness to pay. It also introduces product differentiation softening the competition. We show that equilibria where low-quality sellers separate exist under monopoly and duopoly. Even though low-quality sellers can costlessly imitate high-quality sellers, equilibria where high-quality sellers separate can also exist but under duopoly only. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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