Fundamentación Conceptual

The literature on information disclosure is more focused on theoretical analysis, as is shown in the reviews above, and the number of empirical studies is relatively small. Most of these empirical studies on information disclosure have claimed that mandatory disclosure is necessary to solve adverse selection issues of Akerlof (1970), while some studies have shown how voluntary disclosure can be an effective solution for information asymmetry in market.

Need for mandatory disclosure.Mathios (2000) has examined the information disclosure

of the salad dressings market before Nutrition Labeling and Education Act (NLEA) and found that while all of the sellers of low-fat dressings voluntarily disclosed fat content information, only 9 percent of the sellers of high-fat dressings did so. From this result, he has argued that mandatory disclosure of relevant product information will have a positive impact on consumer behavior and health. Edelman (2009) has observed adverse selection with trust certifications used by many Internet websites. He has examined SiteAdvisor’s measurement data of various websites’ safety and found that TRUSTe-certified websites are actually more than twice as likely to be untrustworthy as uncertified sites. He has explained that this happens because a trust authority currently benefits from that error and thus ignores it. Therefore, he has suggested policies to alter the authorities’ behavior such as sanctions, laws, or regulations. Jin (2005) has shown why voluntary disclosure is not complete, focusing on the competition effects. She has observed health maintenance organizations’ (HMOs) voluntary disclosure of product quality and found that the disclosure decision differs depending on the level of competition. HMOs use information disclosure as means to differentiate themselves and disclosure propensity declines with the degree of competition, which is consistent with some of the theoretical findings about the impact of competition on information disclosure reviewed above. Jin and Leslie (2003) have

done an interesting natural experiment by comparing health inspection scores, consumer demands, and the number of foodborne illness hospitalizations before and after Los Angeles County forced restaurants to display hygiene quality grade cards. They have found a lot of evidence of positive impact of mandatory disclosure, such as increased health inspection scores and decreased hospitalizations due to foodborne illness. Bennear and Olmstead (2008) have also found similar positive effects of mandatory disclosure. They have studied how 517 drinking water suppliers in Massachusetts provide customers with the information about the quality of drinking water they purchase and found that the suppliers who serve more than 10,000 customers and thus are mandated to directly mail the reports had significantly lower violations of drinking water standards, and also reduced health violations by 40 to 57 percent. Xiao (2010) has

investigated the effect of quality accreditation in the childcare market through a structural model of demand allowing consumers to gather quality information from both accreditation status and firm reputation. The result has shown that consumers do not get meaningful information out of accreditation status considering the effect of reputation, and its contribution to consumer welfare is merely 2 percent, suggesting overall ineffectiveness of the accreditation mechanism.

Jin and Kato (2006) have shown evidences that voluntary disclosure may not work in an online setting, and is very closely related with the Essay 2 of this dissertation. By analyzing sales data of collectible baseball cards from eBay and also purchasing and observing the actual

products, they have found that while higher-quality claim cards yield price premium, the average quality from high-claim cards is indistinguishable from cards with more modest claims, and reputable sellers do not provide better-quality products either. These results have shown that there is actually a considerable amount of fraud in this online market under information

selection issues in this marketplace. In particular, this study has some similarities with Essay 2 of this dissertation, as both use the data from same product category and investigate the relationship between claimed quality and information disclosure. However, the focus and findings are

different, as Jin and Kato (2006) basically show how low-type sellers fraudulently claim higher quality (i.e., conceal their types) and achieve higher profit, while Essay 2 explains how low-type sellers fully disclose quality information and increase profit. More detailed discussion on the comparisons between these papers is followed in a later section.

Support for voluntary disclosure.Lewis (2011) has examined the effect of online

information disclosure through observing nearly 50,000 car transactions on eBay Motors. The study found that text and photos posted online work as enforceable contract and thus alleviate information asymmetry, strongly influencing prices. It has also found that disclosure cost affects how much information a seller decides to post. Li, Srinivasan, and Sun (2009) have investigated how product quality indicators such as picture postings and money-back guarantees and seller credibility indicators such as seller rating and third-party payment alleviate dual information asymmetry (uncertainty about product quality and seller credibility) in an auction setting by observing eBay’s paintings and silver plates market. They have found that those indicators encourage bidder participation, and the effect is even stronger when both types of indicators are used simultaneously.

Overall, while most of the empirical findings have argued that mandatory disclosure is necessary, some other studies have shown that voluntary disclosure may help alleviate

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Table 1.3:Empirical Literature on Information Disclosure

Literature Key Findings Context Support for Mandatory

Disclosure

Mathios (2000)

While all of the sellers of low-fat dressings voluntarily disclosed fat content information, only 9% of the sellers of high-fat dressings did so without mandatory disclosure. Therefore, mandatory disclosure of relevant product information will have positive impact on consumer behavior and health.

Salad dressings Yes

Edelman (2009)

TRUSTe-certified websites are actually more than twice as likely to be untrustworthy as

uncertified sites. This happens because a trust authority currently benefits from that error and thus ignores it.

Internet websites Yes

Jin (2005) Health maintenance organizations (HMOs) use information disclosure as a means to differentiate

themselves and disclosure propensity declines with the degree of competition. Healthcare service Yes

Jin and Leslie (2003)

After Los Angeles County forced restaurants to display hygiene quality grade cards, a lot of evidence of positive impact of mandatory disclosure have been observed, such as increased health inspection scores and decreased hospitalizations due to foodborne illness.

Restaurants Yes

Bennear and Olmstead (2008)

The drinking water suppliers who serve more than 10,000 customers and thus are mandated to directly mail the reports had significantly lower violations of drinking water standards, and also reduced health violations by 40–57%.

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Table 1.3:Empirical Literature on Information Disclosure (Continued)

Literature Key Findings Context Support for Mandatory

Disclosure

Jin and Kato (2006)

There is a considerable amount of fraud in the online collectible goods market under information asymmetry, and the information disclosure mechanisms do not work properly to prevent adverse selection issues in this market.

Collectible goods

(Online) Yes

Xiao (2010)

Consumers do not get meaningful information out of accreditation status considering the effect of reputation, and its contribution on consumer welfare is merely 2%, suggesting overall

ineffectiveness of the accreditation mechanism.

Childcare service Yes

Lewis (2011)

In an online car market, text and photos posted online work as enforceable contract and thus alleviate information asymmetry, strongly influencing prices. Disclosure cost affects how much information a seller decides to post.

Used cars (Online) No

Li, Srinivasan, and Sun (2009)

In eBay’s paintings and silver plates market, product quality indicators such as picture postings and money-back guarantees and seller credibility indicators such as seller rating and third-party payment alleviate dual information asymmetry (uncertainty about product quality and seller credibility).