63 Pages Posted: 30 Jul 2008
Date Written: 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.
Keywords: sanitized disclosure, information management, sophisticated bidders, naive bidders, experimental economics
JEL Classification: D80, D82
Suggested Citation: 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