Horizontal Product Differentiation: Disclosure and Competition

This paper studies firms' incentives to disclose horizontal product attributes in a competitive environment. With competition, two elements play an important role: whether (i) firms can disclose only their own product characteristics or also those of their competitors, and whether (ii) competitors can react with their pricing decisions to the type of information disclosed. In all possible cases, full revelation is an equilibrium outcome. More importantly, it is generically the unique equilibrium outcome when (i) advertising is comparative and (ii) prices are also advertised, that is, announced simultaneously with the product information. When advertising is noncomparative or prices are not advertised, many nondisclosure equilibria exist.