Horizontal Product Differentiation: Disclosure and Competition

This paper studies the incentives to disclose horizontal product attributes in an environment where rms compete. With competition, two elements may play an important role, namely whether (i) rms 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 infor- mation disclosed. In all the possible cases that can arise, full revelation is an equilibrium outcome. More importantly, full disclosure is generically the unique equilibrium outcome when (i) advertising is comparative and (ii) prices are also advertised, that is, announced simultaneously with the information about product characteristics. When rms either do not engage in comparative advertising or do not advertise prices, many other nondisclosure equilibria exist.