strategic information disclosure the case of multi attribute products with heterogeneous consumers we examine the incentives for firms to voluntarily disclose otherwise private information about quality attributes of differentiated products in particular we focus on the case of differentiated products with multiple attributes and consumers that are heterogeneous in their preferences over these attributes we show that there exist certain configurations of consumer preferences under which a firm producing a high quality product even with zero costs of disclosure may choose not to reveal the quality of its product this failure of firms to voluntarily disclose the quality of their products will arise when providing consumers with more information results in more elastic demands for these products which in turn triggers more intensive price competition and leads to lower prices and profits for all firms as a result the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory

on the simple economics of advertising marketing and product design we propose a framework for analyzing transformations of demand such transformations frequently stem from changes in the dispersion of consumers valuations which lead to rotations of the demand curve in many settings profits are a u shaped function of dispersion high dispersion is complemented by niche production and low dispersion is complemented by mass market supply we investigate numerous applications including product design advertising marketing and sales advice and the construction of quality differentiated product lines we also suggest a new taxonomy of advertising distinguishing between hype which shifts demand and real information which rotates demand

brand names and price discrimination this paper explains the fact that firms market both labeled and unlabeled products as a practice of price discrimination that emerges as a non cooperative equilibrium outcome the authors consider a market for a differentiated product where the possibility to price discriminate by the selective use of labels is due to the fact that buyers differ in the intensity of their preferences and that before they buy they are unable to distinguish among the different brands without the aid of identifying labels copyright 1987 by blackwell publishing ltd

dynamic pricing of new experience goods we develop a dynamic model of experience goods pricing with independent private valuations we show that the optimal paths of sales and prices can be described in terms of a simple dichotomy in a mass market prices are declining over time in a niche market the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay we consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers

price competition for an informed buyer abstract this paper investigates price competition with private information on the demand side two sellers each offer a different variety of a good to a buyer endowed with a private binary signal on their relative quality the model provides an informational foundation to differentiation in hotelling s price competition game equilibrium comparative statics is performed with respect to the prior belief and the precision of the private information competition is fierce when the prior strongly favors one seller and private signals are relatively uninformative sellers equilibrium profits may fall with the revelation of public information and are nonmonotonic in the prior belief journal of economic literature classification numbers c72 d43 d82 l15

equilibrium with product differentiation tive consumer formulations is used to examine the properties of single and multiple price equilibria conditions under which decreases in the intensity of consumer preferences reduce price are given it is shown that with certain types of demand curves entry can eliminate price cost markups even given product differentiation if competition is localized it is demonstrated that entry does not affect the markup finally the effect of spurious product differentiation on price is examined

what the seller won t tell you persuasion and disclosure in markets imagine that you are considering an investment in a new public offering of a firm s shares the firm s officers make a presentation that includes an audited financial statement an earnings forecast reviewed by its prestigious investment bankers and an impressive demonstration of its new technology or suppose that you are buying a new furnace to replace an old one that is not working well the salesman displays a chart showing that the projected total life cycle cost of one particular model including capital costs and fuel usage over the projected lifetime of the furnace is lower than that of some competing models you have considered this paper reviews the theoretical arguments about how sellers disclose information in an attempt to encourage buyers and the potential role for regulation in encouraging efficient disclosure of information how well does a system of private reporting work when should we expect all the relevant information to be reported if testing and reporting by the seller are costly will too little testing and reporting be done or too much when some information is withheld what sort of information is withheld how do rational buyers respond to such withholding how are prices and welfare affected what role is there for laws and regulations to improve the functioning of markets we address these questions by studying the theory of persuasion games games in which one or more sellers provide verifiable information to buyers to influence the actions they take

the value of public information in monopoly the logic of the linkage principle of milgrom and weber 1982 extends to price discrimination a non linear pricing monopolist who sells to a single buyer always prefers to commit to publicly reveal information a liated to the valuation of the buyer

volume and autocovariances in short horizon individual security returns this article tests for the relations between trading volume and subsequent returns patterns in individual securities short horizon returns that are suggested by such articles as blume easley and o hara 1994 and campbell grossman and wang 1993 using a variant of lehmann s 1990 contrarian trading strategy we find strong evidence of a relation between trading activity and subsequent autocovariances in weekly returns specifically high transaction securities experience price reversals while the returns of low transactions securities are positively autocovarying overall information on trading activity appears to be an important predictor of the returns of individual securities

supplying information to facilitate price discrimination the authors examine the incentive of a seller to allow potential buyers to acquire private information about their tastes for the seller s product improved private information for buyers enables the seller to segment the market and charge higher prices to high value buyers however improved information can also provide rents to buyers in a variety of settings this tradeoff is optimally resolved at one of two extremes either buyers are supplied with the best available knowledge of their tastes or no information is supplied by the seller copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

risk aversion uncertain information and market efficiency abstract this paper develops and tests the uncertain information hypothesis as a means of explaining the response of rational risk averse investors to the arrival of unanticipated information the theory predicts that following news of a dramatic financial event both the risk and expected return of the affected companies increase systematically and that prices react more strongly to bad news than good an empirical investigation of over 9000 marketwide and firm specific events produces results consistent with these predictions we conclude that the market reacts to uncertain information in an efficient if not instantaneous manner

quality disclosure and competition we analyze costly quality disclosure with horizontally differentiated products under duopoly and a cartel and characterize the effect of competition on disclosure and welfare we show that expected disclosure is higher under a cartel than under duopoly and the welfare comparison depends on the level of disclosure cost when the disclosure cost is low welfare is higher under a cartel than duopoly but when the disclosure cost is high welfare is higher under duopoly in either market structure disclosure is excessive in terms of total surplus but insufficient in terms of consumer surplus

the value of private information in monopoly we investigate a basic question about a monopoly with incomplete information when does the seller have an incentive to allow potential buyers to acquire more private information about their tastes for the seller s product under plausible conditions such as log concave density of willingness to pay and convex marginal cost the seller prefers that the paying customers be well informed as a group but be left in the dark regarding their individual tastes

getting rid of trans fats in the us diet policies incentives and progress artificial trans fats in foods increase chronic disease risk in the us population federal nutrition label regulation enacted in 2003 requires mandatory disclosure of trans fat content on packaged foods this action created incentives for the food industry to reduce trans fats both in response to consumer demand and through competition to maintain product reputation subsequent public actions include a ban on trans fat use in new york city restaurants and lawsuits against food companies which created further incentives to remove trans fats especially in the food service industry industry has reformulated packaged foods and found substitutes for restaurant fry oils and trans fats are disappearing from the us food supply market response extends throughout the supply chain and has spurred research to alter oilseed crop characteristics the widespread and relatively rapid industry response likely has improved the quality of us diets and demonstrates the potential for policy actions to spur such improvements

competition and confidentiality signaling quality in a duopoly when there is universal private information abstract we model non cooperative signaling by two firms that compete over a continuum of consumers assuming each consumer has private information about the intensity of her preferences for the firms respective products and each firm has private information about its own product s quality we characterize a symmetric separating equilibrium in which each firm s price reveals its respective product quality we show that the equilibrium prices the difference between those prices the associated outputs and profits are all increasing functions of the ex ante probability of high safety if horizontal product differentiation is sufficiently great then equilibrium prices and profits are higher under incomplete information about quality than if quality were commonly known thus while signaling imposes a distortionary loss on a monopolist using price to signal quality duopolists may benefit from the distortion as it can reduce competition finally average quality is lower since signaling quality redistributes demand towards low quality firms

implementing cool comparative welfare effects of different labeling schemes country of origin labeling cool is being implemented in different forms and degrees in the united states and other countries across the world the first implementation of mandatory country of origin labeling mcool in the united states was for seafood in 2005 this is an example of partial mcool because it exempts the foodservice sector and excludes processed seafood from labeling using a conceptual framework we analyze the welfare impacts of partial mcool when compared to no voluntary and total mandatory cool taking into account imperfect competition in the downstream markets information asymmetry and diversion of low quality product to the unlabeled market the model is general enough to apply to any incomplete regulation for which the perceived low quality product is required to be labeled such as the labeling of genetically modified food in the european union our results show that when consumers have a strong enough preference for domestic relative to imported product regulators can overestimate the gain in consumer welfare from partial mandatory labeling if they ignore the diversion of lower quality imports to the unlabeled sector we show that if the preference for domestic product is large enough total mcool benefits the home market the most overall including domestic consumers and producers but not the imperfectly competitive downstream agents however if total mcool is too costly to implement partial mcool is the second best solution but only if consumers falsely believe the unlabeled product to be of higher quality than it truly is our results suggest more research is needed to determine the extent to which consumers value the information provided by mcool and to enable regulators to consider the welfare impact of diversion in evaluating incomplete mandatory labeling regulations

geographical indications and the competitive provision of quality in agricultural markets the economics of geographical indications gis is assessed within a vertical product differentiation framework that is consistent with the competitive structure of agriculture it is assumed that certification costs are needed for gis to serve as collective credible quality certification devices and production of high quality product is endogenously determined we find that gis can support a competitive provision of quality and lead to clear welfare gains although they fall short of delivering the constrained first best the main beneficiaries are consumers producers may also accrue some benefit if production of the high quality products draws on scarce factors that they own copyright 2008 oxford university press

comparative advertising disclosing horizontal match information improved consumer information about horizontal aspects of products of similar quality leads to better consumer matching but also to higher prices so consumer surplus can go up or down while profits rise with enough quality asymmetry though the higher quality and hence larger firm s price falls with more information so both effects benefit consumers this occurs when comparative advertising is used against a large firm by a small one comparative advertising as it imparts more information therefore helps consumers although it also improves the profitability of the small firm overall welfare goes down because of the large loss to the attacked firm

a model of labeling with horizontal differentiation and cost variability we study optimal disclosure of variety by a multiproduct firm with random costs the prices for labeled varieties are increasing functions of the cost differential and do not reveal which variety is cheaper to produce nondisclosure is most common under moderate uncertainty about costs and not too much idiosyncrasy in valuations and quality asymmetry mandatory disclosure decreases expected welfare when cost variability is large and quality asymmetry is small the cheaper variety tends to be oversupplied undersupplied when disclosure is voluntary mandatory competition among multiproduct firms that source inputs in the same upstream market may not lead to more disclosure

food product composition consumer health and public policy introduction and overview of special section as efforts to improve diets in high income countries intensify attention has turned to how policies may influence diet composition the case studies in this special issue contribute to our understanding of how two main types of policies have influenced food product composition and dietary outcomes 1 policies affecting food manufacturers input costs and 2 information policy affecting competition research on the first type of policy is relatively new but suggests that us commodity policies would not be good policy instruments to influence diets except through the long run impacts of agricultural research research on the impacts of information policy continues to demonstrate that it can spur food industry competition to introduce healthier products but may not result in healthier diets international comparisons show where the us experience may have relevance for other high income countries

collective marketing arrangements for geographically differentiated agricultural products welfare impacts and policy implications this paper examines the incentive of atomistic agricultural producers within a specific geographical region to differentiate and collectively market products we develop a model that allows us to analyze the market and welfare effects of the main types of real world producer organizations using it to derive economic insights regarding the circumstances under which these organizations will evolve and describing implications of the results obtained in the context of an ongoing debate between the european union and united states as the anticipated fixed costs of development and marketing increase and the anticipated size of the market falls it becomes essential to increase the ability of the producer organization to control supply in order to ensure the coverage of fixed costs whenever a collective organization allows a market with a new product to exist that otherwise would not have existed there is an increase in societal welfare counterintuitively stronger property right protection for producer organizations may be welfare enhancing even after a differentiated product has been developed the reason for this somewhat paradoxical result is that legislation aimed at curtailing the market power of producer organizations may induce large technological distortions

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

the international price transmission in stock index futures markets i introduction numerous studies have investigated market linkages and price transmission mechanisms in major international equity markets employing the analytical framework of the vector autoregression var or its variant the error correction model ecm 1 studies such as von furstenberg and jeon 1989 eun and shim 1989 and koch and koch 1991 focus on the short run dynamic pattern of price transmission others like taylor and tonks 1989 and francis and leachman 1998 are primarily interested in the long run pattern of price transmission more recently an increasing number of studies explore both long and short run patterns of price transmission included in this last set are the works of malliaris and urrutia 1992 arshanapalli and doukas 1993 masih and masih 2001 and bessler and yang 2003 among others this study extends the examination of international price transmission to stock index futures markets the article contributes to the existing literature in three aspects first a relatively new empirical framework is applied to allow for inferences of price transmission at three different time horizons instantaneous the short run and the long run building on recent advances in statistical analysis of causal modeling using directed acyclic graphs dags as in spirtes et al 2000 pearl 1995 2000 and swanson and granger 1997 this study is able to explore the contemporaneous causal pattern underlying the correlations among market innovations the existence of strong contemporaneous correlations among market innovations has been well documented in the united states and international stock markets by agmon 1972 eun and shim 1989 koch and koch 1991 housbrouk 1995 and bessler and yang 2003 it is also well recognized by agmon 1972 849 and eun and shim 1989 246 that contemporaneous correlations among market innovations reflect the phenomenon that new information in one market is transmitted and shared by other markets in contemporaneous time due to immediate response to price changes between markets however more in depth analysis on exactly how instantaneous price transmission among market innovations is conducted in international equity markets has not yet been well addressed in the existing literature although bessler and yang 2003 touch on the issue the necessity of imposing constraints in the spirit of the block recursive structure noted by koch and koch 1991 in the dag analysis of var innovations is proposed and discussed thoroughly in this study second innovation accounting analysis is more thoroughly explored in the study innovation accounting tools i e impulse response analysis and forecast error variance decomposition have been commonly used to summarize the dynamic pattern of price transmission among international financial markets the importance of the factorization of innovations i e var residuals in yielding sound inference has been well acknowledged theoretically by bernanke 1986 sims 1986 and swanson and granger 1997 the application of the dag technique as discussed in swanson and granger 1997 and explained in the next section is further key to innovation accounting analysis in this study the instantaneous price transmission pattern between market innovations as identified by the dag analysis provides a data determined solution to the basic problem of orthogonalization of residuals from the ecm and thus is critical to impulse response analysis or forecast error variance decompositions swanson and granger 1997 argue that compared to the choleski decomposition the dag based structural decomposition is sensible but not subjective because it allows for the properties exhibited by the data although several recent studies such as those by bessler and yang 2003 bessler et al 2003 haigh and bessler forthcoming and yang 2003 have used the dag based structural decomposition in a similar setting the study is the first attempt responding to the suggestion by swanson and granger 1997 364 of investigating the empirical implications of the dag based contemporaneous causal modeling