Study suggests consumers assume product quality may be higher than it is when sellers withhold information from them

The American Economic Association has a report on the study here. The actual paper, Is No News (Perceived As) Bad News? An Experimental Investigation of Information Disclosure by Ginger Zhe Jin, Michael Luca, & Daniel Martin, is here. Here's the abstract:

This paper uses laboratory experiments to directly test a central prediction of disclosure theory: that strategic forces can lead those who possess private information to voluntarily provide it. In a simple sender-receiver game, we find that senders disclose favorable information, but withhold unfavorable information. The degree to which senders withhold information is strongly related to their stated beliefs about receiver actions, and their stated beliefs are accurate on average. Receiver actions are also strongly related to their stated beliefs, but their actions and beliefs suggest that many are insufficiently skeptical about nondisclosed information in the absence of repeated feedback.

And here's an excerpt from the paper's conclusions:

Our results also shed light on the factors that may limit voluntary disclosure in the field, and the situations in which we might expect voluntary disclosure to be an effective policy. These findings suggest that unless buyers receive fast and precise feedback about mistakes after each transaction, market forces can be insufficient to close the information gap between sellers and buyers.

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