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Cheap-Talk Disclosure of Negative Information and Risk-Averse Buyers
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- Authors
- Issue Date
- 2021-01
- Publisher
- 경제연구소
- Citation
- Seoul Journal of Economics, Vol.34 No.3, pp.365-392
- Abstract
- In this paper, we study the incentives of low-quality sellers to separate them from high-quality sellers. We consider a framework with asymmetric quality information where the only way to communicate quality is via cheap-talk messages. In this framework, any separating strategy pursued by high-quality sellers can be imitated costlessly by low-quality sellers. We show that in the duopoly setting with risk-averse buyers, equilibria exist, where low-quality sellers voluntarily disclose negative information about their products. If the seller is a monopolist or buyers are risk-neutral, such equilibria do not exist.
- ISSN
- 1225-0279
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