New BERG Working Paper No. 178 by Stefanie Y. Schmitt and Dominik Bruckner published!
In the BERG Working Paper Series 178 Stefanie Y. Schmitt and Dominik Bruckner have published a new paper entitled "Unaware consumers and disclosure of deficiencies".
A complete overview of all BERG Working Papers published so far can be found here.
We analyze firms’ incentives to disclose deficiencies of their goods when consumers lack information. We distinguish two types of information: First, only some consumers are aware of the existence of deficiencies, which reduce the quality of the goods. Second, only some consumers have the expertise to infer the true levels of deficiencies once they are aware of the existence of deficiencies. We show that the interplay of awareness and expertise in a market affects firms’ incentives to disclose. In particular, we demonstrate that more awareness and/or expertise in a market does not universally lead to more disclosure but depends on the level of competition in the market. Conversely, increasing competition does not always increase firms’ incentives to disclose.