Quality disclosure with substitute and complementary goods

Yaxian Gong

Applied Economics, 2021, vol. 53, issue 42, 4857-4867

Abstract: This paper analyzes the quality disclosure when firms simultaneously choose the quantities of products to be produced. By assuming that each firm is privately informed about the quality of its own products and makes quality disclosure decisions after observing private information, we identify the effects of the degree of substitution/complementarity on the amount of disclosed information. We find that when commodities are substitute goods, fixing the disclosure cost, the relationship between competitiveness and the amount of disclosed information is non-monotonic. Furthermore, when commodities are complementary goods, increasing the degree of complementarity will lead to more information being disclosed.

Date: 2021
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DOI: 10.1080/00036846.2021.1910618

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