Information Unraveling Revisited: Disclosure of Horizontal Attributes

Levent Celik

Journal of Industrial Economics, 2014, vol. 62, issue 1, 113-136

Abstract: type="main">

This paper analyzes in a spatial framework how much information a seller discloses about the variety he sells when he faces a buyer with a privately known taste for variety. I identify an equilibrium in which, for each possible variety, the seller's optimal strategy consists of either fully disclosing the variety or disclosing how far it is from the buyer's expected taste. The set of varieties the seller fully discloses monotonically expands as the buyer's taste for variety becomes stronger. I show that this is the unique undefeated equilibrium. From a policy perspective, mandating full disclosure is socially harmful.

Date: 2014
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