Disclosing Multiple Product Attributes

Monic Sun
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Monic Sun: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: A product often has many attributes. The seller of the product may choose whether to disclose these attributes to consumers before their purchase. How do multiple attributes of the product jointly determine the seller's disclosure incentives? I analyze this question by modeling a monopolist whose product is characterized by vertical quality and a horizontal attribute. The monopolist does not always choose disclosure. When the product's vertical quality is common knowledge, a monopolist with higher vertical quality is less likely to disclose the horizontal attribute. When both vertical quality and the horizontal attribute of the product are known only to the monopolist, he is more likely to choose disclosure when vertical quality is higher. Nevertheless, the monopolist may choose nondisclosure even when his product has the highest possible vertical quality. The results shed light on mandatory disclosure policies and the design of quality surveys.

Date: 2008-10
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