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Information Management and Valuation: An Experimental Investigation

63 Pages Posted: 30 Jul 2008  

John W. Dickhaut

Chapman University (Deceased)

Margaret Ledyard

University of Texas at Austin - Department of Economics

Arijit Mukherji

Deceased

Haresh Sapra

University of Chicago - Booth School of Business

Date Written: May 1, 2002

Abstract

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.

Keywords: sanitized disclosure, information management, sophisticated bidders, naive bidders, experimental economics

JEL Classification: D80, D82

Suggested Citation

Dickhaut, John W. and Ledyard, Margaret and Mukherji, Arijit and Sapra, Haresh, Information Management and Valuation: An Experimental Investigation (May 1, 2002). Available at SSRN: https://ssrn.com/abstract=1186322 or http://dx.doi.org/10.2139/ssrn.1186322

John Dickhaut

Chapman University (Deceased)

Margaret Ledyard

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

Arijit Mukherji

Deceased

N/A

Haresh Sapra (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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