Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: Industrial Organisation Theory I No. B03-V3
Firms can communicate private information about product quality through a combination of pricing and disclosure where disclosure may be deliberately false. We examine the eﬀect of regulation that penalizes false disclosure by ﬁrms in a competitive setting. The cost of false disclosure inﬂuences the mix of direct, costly information provision and price signaling in the market, and thereby market outcomes. Regulation reduces prices and the consumption distortion associated with price signaling.