Consumer inference and the regulation of consumer information

- Mandatory disclosures have an informative and a signaling role.
- The signaling role affects how consumers weight product attributes.
- Inferential mistakes lead to over and under-regulation.

When consumers are uncertain about the importance of a product attribute, mandatory disclosures have two effects: directly communicating attributes, and an inferential effect that changes how much weight consumers put on product attributes. I model a signaling game between regulators and consumers in which regulators perfectly reveal their private information about the importance of an attribute through the intensive margin of regulation. The model has empirical predictions that distinguish it from traditional models of mandatory disclosure. I also examine inferential mistakes that can lead to over or under-regulation and consumer over or under-estimates of the importance of product attributes.