Responses of Consumers to Mandatory Disclosure of Information: Evidence from Japanese Interbrand Cigarette Sales

Abstract

Whether there is a need for mandatory disclosure of information continues to be hotly disputed. Many economists insist, by means of theoretical analyses, that mandatory disclosure is necessary, and much empirical evidence supports this view. However, some economists do not accept this claim and strong evidence has recently been provided that undermines the idea that more information is better.1 Thus, clarification of which side of the debate provides the most accurate description of reality is still needed and has important implications for policy making and legislation. This study provides new evidence that mandatory disclosure decreases tar intake, increases consumer welfare, and makes monopolistic firms improve product quality. A new empirical technique for testing the effect of mandatory information disclosure, which makes use of a difference-in-difference (DID) approach, is also provided for directly estimating those changes in interbrand cigarette demands resulting from policy changes and increased information awareness about nicotine and tar content levels.KeywordsInformation DisclosureTotal IntakeCigarette ConsumptionVoluntary DisclosurePolicy EventThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.