The Effect of Information Disclosure on Product Demand: Evidence from Yahoo! Auctions Taiwan

Abstract

We study the effect of information disclosure in resolving adverse selection by estimating the demand for a specific type of T-shirt sold on the Yahoo! Auctions platform. To reduce information asymmetry in Internet transactions, sellers usually voluntarily disclose product information by providing photos on the website. The disclosed information in this market can be naturally separated into high and low quality levels. Providing high-quality information which accurately reflects product characteristics not only increases consumer demand, but also has a positive marginal effect for adding more high-quality information. On the contrary, increasing the amount of low-quality information has almost no effect on demand.

Keywords: Information quality, asymmetric information, demand estimation, information disclosure

JEL Classification: C21, L15, L81