Information Management and Valuation: An Experimental Investigation
John W. Dickhaut
Chapman University (Deceased)
University of Texas at Austin - Department of Economics
University of Chicago - Booth School of Business
May 1, 2002
We explore the management of information and the response of market prices to such information. Sellers may be uncertain of dividends. We examine whether sellers anticipate buyers' pricing behavior and whether buyers' prices reflect correct inferences of the disclosure strategy of sellers. Buyers' inferences and sellers' anticipation require implicit Bayesian updating in solving for the equilibrium decision strategies of sellers and pricing behavior of buyers. Because of traditional problems in inducing Bayesian behavior we employ a manual technology. Our results show that if we split selling strategies into "information management" (sanitization), full disclosure, and randomization, then the information disclosed is consistent with sellers anticipating buyers' pricing functional. Furthermore, prices themselves are sensitive to the information environment (Full Certainty, Intermediate Certainty, and Low Certainty) in which information asymmetry is manipulated.
Number of Pages in PDF File: 63
Keywords: sanitized disclosure, information management, sophisticated bidders, naive bidders, experimental economics
JEL Classification: D80, D82
Date posted: July 30, 2008
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