Regulating product communication
- Author(s)
- Maarten Janssen, Santanu Roy
- Abstract
Information regulation that penalizes deceptive communication by firms can have significant unintended consequences. We consider a market where competing firms communicate private information about product quality through a combination of pricing and direct communication (advertising or labeling) that may be false. A higher fine for lying reduces the reliance on price signaling, thereby lowering market power and consumption distortions; however, it may lead to excessive disclosure. Low fines are always worse than no fines. High fines are welfare improving only if communication itself is inexpensive. Penalizing false claims may reduce profits of both high-and low-quality firms.
- Organisation(s)
- Department of Economics
- External organisation(s)
- Southern Methodist University
- Journal
- American Economic Journal: Microeconomics
- Volume
- 14
- Pages
- 245-283
- No. of pages
- 39
- ISSN
- 1945-7669
- DOI
- https://doi.org/10.1257/mic.20190187
- Publication date
- 2020
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502013 Industrial economics, 502021 Microeconomics
- Keywords
- ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/dc69785c-76b4-485d-bc8b-689f5b653213