Communicating Attribute Importance under Competition

When consumers encounter unfamiliar products, they often face difficulty in understanding
which attributes are crucial, leading to challenges in product comparison and potential di-
minished interest in the category. This study examines how firms strategically communicate
the importance of product attributes in a competitive environment. Despite consumer aware-
ness of attributes and their levels, ambiguity regarding their relative importance remains.
We analyze a situation where two firms each receive a noisy signal about the true attribute
importance and convey this information to consumers through cheap-talk messages. Follow-
ing these communications, consumers decide whether to incur a cost to further explore the
category by visiting stores. Our findings reveal a truthful equilibrium where firms honestly
report their received signals. In this equilibrium, when both firms’ messages align, their
collective messages can credibly convey information about the more important attribute,
thereby encouraging store visits and purchase. Interestingly, firms may still find it advan-
tageous to truthfully highlight an attribute, even if it doesn’t align with their competitive
advantage. Moreover, we show that without competition (i.e., a single firm communicating),
this truthful equilibrium does not exist. Thus, the presence of the competition enables the
credible communication of information about attribute importance, benefiting both firms
by enhancing consumer engagement with the product category