37 Pages Posted: 10 Jan 2013

See all articles by Anthony M. Marino

Anthony M. Marino

University of Southern California - Marshall School of Business

Date Written: December 26, 2012


This paper considers a simple hidden action agency problem where the principal has hidden information concerning the agent's utility of cash flow or cash flow, the agent's effort productivity, or the agent's cost of effort. The question is whether the principal should precommit to disclosing these different sources or types of information to the agent. Such single source disclosure always increases the agent's utility. If the hidden information emanates from effort productivity or effort cost, disclosure also increases the firm's profit. If information emanates from the single source of utility/cash flow, non-disclosure can raise profit and total surplus, when the production circumstances satisfy conditions on effort cost and effort productivity. Under these conditions, non-disclosure can also be optimal if disclosure affects the agent's motivation.

Keywords: Disclosure

JEL Classification: L2

Suggested Citation

Marino, Anthony M., Transparency (December 26, 2012). Available at SSRN: or

Anthony M. Marino (Contact Author)

University of Southern California - Marshall School of Business ( email )

Dept. of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6525 (Phone)
213-740-6650 (Fax)

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