Economics at your fingertips  

Incentives of low‐quality sellers to disclose negative information

Dmitry Shapiro and Seung Huh

Journal of Economics & Management Strategy, 2021, vol. 30, issue 1, 81-99

Abstract: The paper studies incentives of low‐quality sellers to disclose negative information about their products. We develop a model in which one's quality can be communicated via cheap‐talk messages only. This setting limits the ability of high‐quality sellers to separate, as any communication strategy they pursue can be costlessly imitated by low‐quality sellers. We study two factors that can incentivize low‐quality sellers to communicate their quality: buyers' loss aversion and competition. Quality disclosure reduces buyers' risk, thereby increasing their willingness to pay for the product. It also introduces product differentiation, softening the competition.

Date: 2021
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2021-05-12
Handle: RePEc:bla:jemstr:v:30:y:2021:i:1:p:81-99