Verifiable Disclosure

ORCID

Jeremy Bertomeu, https://orcid.org/0000-0001-6746-5767

Language

English (en)

Publication Date

2015

Abstract

We develop a unified treatment of truthful disclosure (persuasion) games, providing a joint framework that nests, among other models, unraveling theory (Grossman 1981; Milgrom 1981), costly disclosure (Jovanovic 1982; Verrecchia 1983), uncertainty about information en- dowment (Dye 1985; Jung and Kwon 1988) and multi-dimensional disclosure (Shin 2003). We show the existence of (at most) a unique equilibrium that is reasonable given a commonly used signaling refinement, and provide a constructive proof of the equilibrium strategy and beliefs. We use the model to examine the following question: can the sender benefit from a regulation that commits to disclosing more precise information? We show that the sender is worse off if an unconditional reduction in discretion induces a more informative equilibrium. Conversely, mandating disclosure of unfavorable information may increase the sender’s ex ante payoff.

Document Type

Working Paper

Comments

Duplicate of https://doi.org/10.7936/kc7n-zn44

Author's Department

Accounting

Author's School

Olin Business School

This document is currently not available here.

Share

COinS