Time: 12:00-13:00， 10th Dec. 2019

Venue: Room 505

Topic: Voluntary Disclosure of Negative Information: Experimental Analysis (jointly with Dmitry Shapiro)

Speaker: Jaesun Lee (Assistant Professor, Tongji University)

Abstract：

We study sellers’ willingness to voluntarily disclose negative information about product quality and their profits as well as buyers’ behavior and social welfare. We conduct a lab experiment for the monopoly and the duopoly settings in which sellers send cheap-talk messages on product quality and set a price while buyers decide whether to purchase the product or not. We show that sellers use cheap-talk messages to communicate their low quality. Revealing negative information has mixed and mostly insignificant effect on profit. In the monopoly treatments, revealing negative information has positive effect on welfare as it increases probability to purchase. In the duopoly treatments, the effect is much weaker and can be significantly negative as it increases buyers’ tendency to purchase a safe low-quality product.