Worried about Adverse Product Effects? Information Disclosure and Consumer Awareness

Sanxi Li, Martin Peitz and Xiaojian Zhao

No 10-157, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Whether consumers are aware of potentially adverse product effects, is key for private and social incentives to disclose information. To obtain a better understanding of this issue we propose a simple monopoly model that highlights the conceptual difference between consumer unawareness and consumer uncertainty. We show that total surplus may be larger in an environment in which consumers are unaware of the potentially adverse effect. We also show that disclosing information whether a particular ingredient is harmful or not increases consumer surplus, but mandatory disclosure of the level of this ingredient may make consumers worse off.

Keywords: Information disclosure; informative advertising; consumer awareness (search for similar items in EconPapers)
JEL-codes: D8 L5 M3 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-bec, nep-cta and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:22665

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