VOLUNTARY DISCLOSURE AND EARNINGS EXPECTATIONS IN MULTI‐LEVEL MARKETING

Stacie A. Bosley, Sarah Greenman and Samantha Snyder

Economic Inquiry, 2020, vol. 58, issue 4, 1643-1662

Abstract: Multi‐level marketing (MLM) firms recruit individuals into a business opportunity but are not required to disclose the earnings of past participants. Some MLMs voluntarily create income disclosures, which may serve both marketing and risk‐management functions. We create an economic experiment to explore the impact of MLM income disclosure on consumer interest and expectations. Results suggest that disclosure does not significantly alter interest in the business opportunity but does reduce expectations, on average, when subjects are asked to estimate annual income in a lab environment. We discuss findings in the context of current regulatory policy. (JEL D18, D82, M38)

Date: 2020
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