Affiliation:
1. University of Vienna, National Research University Higher School of Economics, and CEPR (email: )
2. Southern Methodist University, Department of Economics (email: )
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. (JEL D21, D83, L25, M37)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
2 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献
1. Deceptive advertising, regulation and naive consumers;International Journal of Industrial Organization;2023-12
2. Self-Reported Signaling;American Economic Journal: Microeconomics;2023-08-01