Essays on Information Asymmetry and Leakage
Abstract
Since the underlying qualities of products and firms are not readily apparent, information asymmetry exists at the heart of marketing. This dissertation investigates information asymmetry that is present specifically between: (1) firms and consumers, and (2) firms and investors. I advance our knowledge of how information asymmetry can be reduced in beneficial ways for the firm either by voluntary or involuntary means. This dissertation consists of two essays. In Essay 1, I examine involuntary information leakage in the movie industry. I find that spoilers, which prematurely resolve plot uncertainty for those who have yet to see the movie, can increase box office revenues for movie studios. The positive spoiling effect is driven by uncertainty reduction, in which spoilers provide diagnostic information to consumers unsure about the quality of a movie. In Essay 2, I examine voluntary information leakage in the context of firm signaling. As investors do not have access to private information and cannot observe firm activities such as innovation projects and corporate policy changes, firms send signals to investors that provide cues to such information. I find that data breaches previously experienced by firms can serve as information that negatively influences the interpretation of otherwise positive signals. Taken together, this dissertation outlines implications for firms to effectively respond to and manage information asymmetry in the marketplace.