A Note on Quality Disclosure and Competition

Jos Jansen ()
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Jos Jansen: Department of Economics and Business Economics, Aarhus University, Denmark, Postal: 8210 Aarhus V, Denmark

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: Competitive pressure is lower in markets where goods are more differentiated. I analyze how a change in the degree of horizontal product differentiation affects the incentives of duopolists to disclose quality information. If disclosure is costly, then a firm discloses high qualities but conceals low qualities in equilibrium. The higher the disclosure cost, the higher the equilibrium threshold below which firms conceal quality information. I show that the effect of product differentiation on quality disclosure depends on the cost of disclosure. For low (high) disclosure costs, a firm discloses more (less) quality information if goods become more differentiated.

Keywords: Hotelling model; quality; transportation cost; product differentiation; information disclosure; disclosure cost; competitive pressure (search for similar items in EconPapers)
JEL-codes: D82 D83 L13 L15 M31 (search for similar items in EconPapers)
Pages: 30
Date: 2015-08-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse and nep-mic
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Citations: View citations in EconPapers (1)

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