Costly Voluntary Disclosure in a Screening Game

33 Pages Posted: 28 Jun 2013

See all articles by Paul Pecorino

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies

Mark van Boening

University of Mississippi - Department of Economics

Date Written: June 26, 2013

Abstract

We conduct an experimental analysis of pretrial bargaining, while allowing for the costly voluntary disclosure of private information in a screening game. In this game, the theoretical prediction is that costly voluntary disclosures will not occur. This hinges on the prediction that the person making the offer will extract all the joint surplus of settlement from the player making the costly disclosure. If concerns about fairness or reciprocity prevent this from occurring, then we may observe costly disclosures when none are predicted to occur. Our chief finding is that plaintiffs with a strong case reveal their private information 42% of the time, when the theoretical prediction is that they should do so 0% of the time. Fairness considerations appear to be important in explaining the deviation from theory. For a plaintiff with a strong case, the return to revealing private information is approximately zero, while theory predicts that this return should be negative.

Keywords: experimental bargaining, asymmetric information, costly voluntary disclosure, civil litigation, fairness

JEL Classification: K41, D82, C91

Suggested Citation

Pecorino, Paul and van Boening, Mark, Costly Voluntary Disclosure in a Screening Game (June 26, 2013). Available at SSRN: https://ssrn.com/abstract=2285718 or http://dx.doi.org/10.2139/ssrn.2285718

Paul Pecorino (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-0379 (Phone)
205-348-0590 (Fax)

Mark Van Boening

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

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