We consider an oligopoly model in which each firm chooses not only its price but also its advertising strategy regarding how much, and what, product information to provide. To highlight firms’ strategic incentives, we impose no structural restrictions on feasible advertising content, so that each firm can disclose or conceal any information. We obtain a comprehensive characterization of the equilibrium advertising strategy and provide some sufficient conditions for the existence of symmetric pure-price equilibria. We show that intense competition induces firms to provide accurate product information; firms usually obfuscate consumers’ relatively low or high values; and requiring firms to provide more product information can reduce social surplus and also be harmful to consumers.

We establish limitations to the usage of direct revelation mechanisms (DRMs) by corporations seeking decision-relevant information in economies with securities markets. In this environment, posting a DRM increases the informed agent’s outside option: if the agent rejects the DRM, he convinces the market he is uninformed, and he can aggressively trade with low price impact, thereby generating large (off-equilibrium) trading gains. This endogenous outside option may make using a DRM to screen uninformed agents impossible. When screening is possible, solely relying on the market for information is optimal if the increase in outside option is sufficiently large.