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Horizontal Product Differentiation: Disclosure and Competition

Maarten C. W. Janssen () and Mariya Teteryanikova ()
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Maarten C. W. Janssen:
Mariya Teteryanikova:

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: The unraveling argument says that when a rm may produce di erent qualities and quality is unknown to consumers, the rm has an incentive to disclose the private information as in any pool of rms there is a best quality rm and this rm has an incentive to disclose. Recent literature has established that this argument does not carry over to an environment where the product is not vertically, but horizontally di erentiated. This paper argues that with horizontally di erentiated products, competition restores the unraveling argument. In a duopoly market we show that all equilibria of the disclosure game have rms fully disclosing the variety they produce.

JEL-codes: D43 D82 M37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cta and nep-ind
Date: 2012-07
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