Costly Voluntary Disclosure in a Screening Game
33 Pages Posted: 28 Jun 2013
Date Written: June 26, 2013
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: Suggested Citation