Disclosure of Verifiable Information under Competition: An Experimental Study

Stefan Penczynski, Christian Koch and Sihong Zhang
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Stefan Penczynski: School of Economics and Centre for Behavioural and Experimental Social Science, University of East Anglia
Christian Koch: Department of Economics, University of Vienna
Sihong Zhang: McKinsey & Company, Inc.

No 25-01, Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) from School of Economics, University of East Anglia, Norwich, UK.

Abstract: This study investigates experimentally information disclosure in settings with and without seller competition. Sellers often choose to report information selec-tively and buyers account for this—even though not fully—by bidding skeptically. As expected, competition increases sellers’ information disclosure but leads, sur-prisingly and replicably, to more buyer na¨ıvety, offsetting the welfare benefits from improved disclosure. A framing effect generates this result: merely describing a situation as competitive rather than monopolistic alters buyer behavior. Akin to the so-called Peltzman effect, buyers seemingly perceive competition as a safer en-vironment to which they behaviorally adapt by abandoning their skepticism. Con-sequently, consumer benefits hinge on perceived competitiveness—a vulnerability firms may leverage to their advantage.

Keywords: Disclosure; verifiable information; competition; Peltzman effect (search for similar items in EconPapers)
JEL-codes: D40 D83 (search for similar items in EconPapers)
Date: 2025-02
New Economics Papers: this item is included in nep-com, nep-cta, nep-exp and nep-gth
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