Strategic Disclosure of Valuable Information within Competitive Environments
Indiana University Bloomington - Department of Economics
August 25, 2008
CAEPR Working Paper No. 2008-022
Can valuable information be disclosed intentionally by the informed agent even within a competitive environment? In this article, we bring our interest into the asymmetry in reward and penalty in the payoff structure and explore its effects on the strategic disclosure of valuable information. According to our results, the asymmetry in reward and penalty is a necessary condition for the disclosure of valuable information. This asymmetry also decides which quality of information is revealed for which incentive; if the penalty is larger than the reward or the reward is weakly larger than the penalty, there exists an equilibrium in which only a low quality type of information is revealed, in order to induce imitation. On the other hand, if the reward is sufficiently larger than the penalty, there exist equilibria in which either all types or only high quality type of information is revealed, in order to induce deviation. The evaluation of the equilibrium in terms of expected payoff yields that the equilibrium where valuable information is disclosed strategically dominates the equilibrium where it is concealed.
Number of Pages in PDF File: 34
Keywords: Strategic information disclosure, Asymmetry in reward and penalty
JEL Classification: D82, M52
Date posted: August 26, 2008
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