Investment in Concealable Information

44 Pages Posted: 6 Sep 2012

See all articles by Frances Xu

Frances Xu

The University of Hong Kong

Wing Suen

The University of Hong Kong - School of Economics and Finance

Date Written: May 2, 2012

Abstract

A sender who wants to influence a decision maker has no incentive to collect information if he has to reveal all evidence so obtained, because the expected value of posterior belief is equal to the prior. If he can conceal his evidence at a cost, he invests more in obtaining information when this cost is lower, and this dampens the incentive to conceal evidence as the decision maker would become skeptical upon hearing nothing. In equilibrium greater freedom to conceal information may lead to greater information revelation. A sender has less incentive to conceal evidence when there is another sender who can obtain conditionally independent information, regardless of whether the other sender has the same or the opposite bias.

Keywords: influence, investigation, competing senders, opposing biases, law of iterated expectations

JEL Classification: D82, D83

Suggested Citation

Xu, Frances and Suen, Wing C., Investment in Concealable Information (May 2, 2012). Available at SSRN: https://ssrn.com/abstract=2142239 or http://dx.doi.org/10.2139/ssrn.2142239

Frances Xu (Contact Author)

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Wing C. Suen

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
852 2859 1052 (Phone)
852 2548 1152 (Fax)

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