Abstract
We study how buyer power affects producers’ incentives to share information with retailers. Adopting the Bayesian persuasion framework, we show that full information disclosure is optimal only when buyer power is sufficiently low. Using the presence of retail price recommendations as the proxy for information sharing between producers and retailers, we empirically examine the implication of our model. Consistent with the theory, we find that producers of products whose sales rely more on powerful retailers are less likely to use retail price recommendations.
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