Investment in Concealable Information

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