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

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, a seller usually voluntarily discloses product information by providing photos on the website. The disclosed information in the market we studied can be naturally separated into high and low quality levels. Not only does providing high-quality information which accurately reflects product characteristics increase consumer demand, but also an increase in the quantity of high-quality information will have a positive marginal effect. On the contrary, increasing the amount of low-quality information has almost no effect on demand.