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
DOI
https://doi.org/10.7936/kc7n-zn44
Author's Department
Accounting
Recommended Citation
Bertomeu, Jeremy and Cianciaruso, Davide, "Verifiable Disclosure" (2015). Olin Business School Faculty Research. 9.
https://openscholarship.wustl.edu/business_facpubs/9