Download or read book Mandatory Versus Voluntary Disclosure of Product Risks written by A. Mitchell Polinsky and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a model in which firms are able to acquire information about product risks and may or may not be required to disclose this information. We initially study the effect of disclosure rules assuming that firms are not liable for the harm caused by their products. Although mandatory disclosure obviously is superior to voluntary disclosure given the information about product risks that firms possess - since such information has value to consumers - voluntary disclosure induces firms to acquire more information about product risks because they can keep silent if the information is unfavorable. The latter effect could lead to higher social welfare under voluntary disclosure. The same results hold if firms are liable for harm under the negligence standard of liability. Under strict liability, however, firms are indifferent about revealing information concerning product risk, and mandatory and voluntary disclosure rules are equivalent.

Download or read book Product Use Information and the Limits of Voluntary Disclosure written by Oren Bar-Gill and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Concern about asymmetric information in markets for consumer goods and services has focused on product attribute information. We highlight the importance of another category of information - product use information. In important markets, sellers have better information about how a consumer will use their product or service than the consumer herself. Moreover, we show that the classic unraveling results do not extend to product use information, and thus sellers are less likely to voluntarily disclose this type of information. Our findings have important policy implications: While most disclosure mandates target product attribute information, our analysis suggests that mandating disclosure of product use information may be more important. Indeed, policymakers are beginning to recognize the importance of product use disclosures.

Download or read book Voluntary Disclosure of Product Information written by Dainis Zegners and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: An important question in markets with asymmetric information is why in practice fewer sellers voluntarily disclose their private information than theory would predict. To better understand this discrepancy, I use data from an online self-publishing platform to examine the empirical relationship between pricing and voluntary disclosure. On this platform, I observe whether authors disclose characteristics of their e-books by offering free samples. In contrast to the prediction of theories of unraveling, I show that for e-books without a posted online rating, indicating that their quality is unknown to the market, offering a sample is associated with a lower price. I also show that for unrated e-books, fewer authors offer a sample while simultaneously setting a higher price than authors of rated e-books. These results can be explained by incorporating into a model a fraction of naive buyers who do not update their beliefs upon observing that a seller does not disclose. This gives low-quality sellers an incentive to conceal their quality by not disclosing and to set high prices to exploit naive buyers.

Download or read book Voluntary Disclosure of Accounting Information for Product Warranty Liability written by Feng Gu and published by . This book was released on 1997 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Mandatory Vs Voluntary Disclosure in Markets with Informed and Uninformed Customers written by Michael J. Fishman and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerous rules mandate the disclosure of sellers' information. This article analyzes two questions regarding disclosure: (i) Why wouldn't sellers voluntarily disclose their information? and (ii) Who gains and who loses with mandatory disclosure? Previous analyses assume that all customers are knowledgeable enough to understand a seller's disclosure, and a key result is that there is no role for mandatory disclosure. Either voluntary disclosure is forthcoming, or if it is not, no one prefers mandatory disclosure. We generalize the standard model by considering the case in which not all customers understand a seller's disclosure. We show that if the fraction of customers who can understand a disclosure is too low, voluntary disclosure may not be forthcoming. If so, mandatory disclosure benefits informed customers, is neutral for uninformed customers, and harms the seller. Our results suggest that we should find mandatory disclosure in markets where product information is relatively difficult to understand.

Download or read book Voluntary Disclosure and the Role of Product Market Competition written by Narayanaswamy Ramaswami and published by . This book was released on 2001 with total page 338 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effect of Product Market Competition on Corporate Voluntary Disclosure Decisions written by Yong-Chul Shin and published by . This book was released on 2000 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Advances in Environmental Accounting and Management written by Martin Freedman and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Voluntary Disclosure in a Multi Audience Setting written by Sanjeev Bhojraj and published by . This book was released on 2014 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the issue of voluntary disclosure in multi-audience settings by focusing on the electric utility industry as it transitions toward deregulation. We consider three target audiences: industry regulators, capital market participants, and product market competitors. As predicted, we find that utilities tend to disclose less strategic information in jurisdictions where the stranded cost recovery issue is unresolved, consistent with incentives to appear quot;weakquot; to regulators. Further, we find that utilities whose viability in a deregulated environment is more uncertain tend to provide more disclosures, unless they face greater threat from competitors. These results are consistent with prior theoretical research on conflicting disclosure incentives to capital markets versus product markets.Key Words: Voluntary disclosure; Electric utilities; Deregulation.

Download or read book Quality Disclosure and Comparative Advertisement written by Yeolyong Sung and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study firms' voluntary disclosure in an oligopoly market for vertically differentiated products, where firms are allowed to advertise a rival's product as well as their own products. When consumers are uncertain of product qualities, Board (2009)1) and Hotz and Xiao (2011)2) show that price competition among firms alleviates firms' incentives to disclose the quality of their own product. Nonetheless, firms still have incentives to distinguish their own products from those of the competitors to attract more consumers. A comparative advertisement is a useful way to distinguish products and thus, a rival's advertisement can lead to a disclosure of a firm's product information. Comparative or negative advertisements are used in many industries and political campaigns. In 2010, for example in the United States, Verizon Wireless compared their service coverage with that of the competitor, AT&T, on the TV commercial and their Web site in order to advertise the 3G network service for mobile phones (See Figure 1). They had a broader service area than AT&T did and used a comparative advertisement to show that their service was superior.3) Through the negative advertisement by Verizon Wireless on the AT&T's service, the information on the AT&T's mobile phone service was revealed even though AT&T did not disclose their nation-wide service coverage in a picture. This is in contrast with the fact that AT&T themselves put the map showing their nation-wide 3G service coverage for iPads on their Web site.4) At that time AT&T was the only service provider for iPads. This paper allows firms to advertise a rival's product. We show that the qualities of all the products in an industry are fully revealed by a high quality firm's comparative advertisement and full revelation is the unique equilibrium outcome. Each firm's advertisement (message) can convey information on either its own product quality or a rival's or both. Differentiating from traditional models that consider advertisement as a signal of product qualities (Nelson, 19745); Schmalensee, 19786); Grossman and Shapiro, 19847); Kihlstrom and Riordan, 19848)), we consider it as a truthful claim about its qualities. In other words, we see the role of advertisement as conveying factual information directly to the consumers. The restriction of firms' messages to truthful claims can be justified by the argument that an untruthful claim, such as an overstatement on their own product or an understatement on their rival's product, could be challenged in a court of law. If the claim was found to be untruthful, the firm that sent the untrue message might have to pay a fine or more, and the true quality would be revealed as the result. In this model, full revelation occurs as the unique equilibrium outcome. If firms do not disclose any information and consumers do not distinguish the qualities among products, then the firms' profits are zero by price competition. By revealing some information and having consumers perceive that the product is differentiated from its rivals', a firm can increase the profit. In the competition between two firms, there exists an equilibrium in which full information on all products is revealed by the firm with a higher quality (henceforth, called a high quality firm) as in the above example of the mobile phone service industry. The high quality firm can increase the profit by advertising the rival's low quality product as negatively as possible because such an advertisement increases its demand by making more consumers switch from the low quality product to the high quality product. Since false claims are not allowed, the negative advertisements reveal the true quality of the rival's product. Meanwhile, the high quality firm reveals the true quality of its own product building grounds for a higher price. Since an advertisement that fully reveals both firms' product qualities is a dominant strategy for the high quality firm, full revelation is the unique outcome. In general, full revelation fails without advertisement on a rival's product. Such revelation, as many studies suggest, increases consumers' welfare, and thus the literature argues in favor of the introduction of mandatory disclosure laws (Fishman and Hagerty, 20039); Board, 2009; Hotz and Xiao, 2011). However, mandatory disclosure laws burden both private and public sectors with an enforcement cost and a deadweight loss. As an alternative to the costly legal solution, the results of this paper suggest that a market can lead to a full revelation with voluntary disclosure if negative advertisement on rivals' products is allowed. As a parallel example, in the domain of politics, negative advertisement exists in the form of negative campaigning. Amid ongoing debate and controversy, recent studies such as Polborn and Yi (2006)10) defend prevailing negative campaigning arguing that consequently revealed information on the candidates empowers the electorate to make more-informed decisions. The rest of the paper is organized as follows. After reviewing the related literature in Section 2, we present an oligopoly model with price competition between two firms in Section 3 and derive the firms' profit functions from the equilibrium pricing rules and the associated demand functions in Section 4. With the profit functions, in Section 5, we analyze the firms' advertisement strategies and show that there exists an equilibrium in which full information is revealed by the high quality firm. Section 6 concludes the findings and discusses extendible issues.

Download or read book Products Liability Signaling and Disclosure written by Andrew F. Daughety and published by . This book was released on 2007 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we examine the behavior of a firm that produces a product with a privately-observed safety attribute; that is, consumers cannot observe directly the product's safety. The firm may, at a cost, disclose its safety prior to sale; alternatively, if a firm does not disclose its safety then consumers can attempt to infer its safety from the price charged. The liability system is important because it is a determinant of the firm's full marginal cost, which consists of both manufacturing cost and liability cost. If the firm does not bear substantial liability for a consumer's harm, then the firm's marginal cost consists mainly of manufacturing cost, which is presumably higher for safer products. On the other hand, if the firm does bear substantial liability for a consumer's harm, then the firm's marginal cost consists of both manufacturing cost and liability cost. In this case, it is quite possible for a firm producing a safer product to have lower full marginal cost. We characterize the firm's equilibrium disclosure and pricing behavior, and compare that behavior and the associated welfare to what would occur under a regime of mandatory disclosure. We derive a range of disclosure costs that would induce a high-safety firm to choose disclosure over signaling. When the firm's full marginal cost is increasing (decreasing) in safety, a firm with a high-safety product will sometimes inefficiently choose to signal rather than disclose (disclose rather than to signal). Furthermore, we find that whether ex ante information regulation (in the form of mandatory disclosure) or reliance on ex post liability that induces information revelation is the better policy also depends upon whether the firm faces substantial liability for a consumer's harm. Finally, we find that a small fraction of naively optimistic consumers (who always buy as if the product were of high safety) leads to higher profits for both less-safe and safer products, and a reduced incentive for voluntary disclosure.

Download or read book Voluntary Disclosure Under Imperfect Competition written by Lucy F. Ackert and published by . This book was released on 1998 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Voluntary Disclosure and Corporate Innovation written by Sheng-Syan Chen and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether a firm's voluntary disclosures, proxied by management earnings forecasts, affect its innovation activity. A firm making more disclosures generates fewer patents and lower-quantity patents. Enactment of SOX is applied as a natural experiment for an exogenous shock to voluntary disclosure. Corporate innovation is reduced for accelerated filers, especially after SOX becomes effective. Nondedicated institutional ownership, R&D spillover, and rival firms' innovation are higher for accelerated filers after SOX. There is more of a negative effect of voluntary disclosure on innovation activity when product markets are highly competitive, industry information diffusion is speedy, and disclosures are more informative.

Download or read book The Impacts of Product Market Competition on the Quantity and Quality of Voluntary Disclosures written by Li, Xi and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines how firms' voluntary disclosure decisions are influenced by product market competition. Using separate measures to capture different dimensions of competition, I show that competition from potential entrants increases disclosure quantity while competition from existing rivals decreases disclosure quantity. I also find that competition enhances disclosure quality mainly through reducing the optimism in profit forecasts and reducing the pessimism in investment forecasts. Moreover, I find that the above association is less pronounced for industry leaders, consistent with industry leaders facing less competitive pressures than industry followers.

Download or read book The Oxford Handbook of Behavioral Economics and the Law written by Eyal Zamir and published by Oxford Handbooks. This book was released on 2014 with total page 841 pages. Available in PDF, EPUB and Kindle. Book excerpt: 'The Oxford Handbook of Behavioral Economics and Law' brings together leading scholars of law, psychology, and economics to provide an up-to-date and comprehensive analysis of this field of research, including its strengths and limitations as well as a forecast of its future development. Its twenty-nine chapters are organized into four parts.

Download or read book An Introduction to Law and Regulation written by Bronwen Morgan and published by Cambridge University Press. This book was released on 2007-04-12 with total page 338 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, regulation has emerged as one of the most distinct and important fields of study in the social sciences, both for policy-makers and for scholars who require a theoretical framework that can be applied to any social sector. This timely textbook provides a conceptual map of the field and an accessible and critical introduction to the subject. Morgan and Yeung set out a diverse and stimulating selection of materials and give them context with a comprehensive and critical commentary. By adopting an interdisciplinary approach and emphasising the role of law in its broader social and political context, it will be an invaluable tool for the student coming to regulation for the first time. This clearly structured, academically rigorous title, with a contextualised perspective, is essential reading for all students of the subject.

Download or read book Strategic Information Disclosure written by V. Joseph Hotz and published by . This book was released on 2006 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.