Public Information Quality with Monopolistic Sellers

Posted: 25 Jan 2016

See all articles by Bharat Sarath

Bharat Sarath

Rutgers, The State University of New Jersey - Accounting

Date Written: June 21, 1995

Abstract

We show that in markets with asymmetric information, even if there is full agreement on the choice of optimal information quality, entrusting the choice of (unverifiable) public information quality to traders who benefit from such information leads to inefficiencies. However, delegation of information quality choice to an independent agent who is precluded from sharing in trading profits results in efficient implementation. This result provides a game-theoretic rationale for current institutional arrangements where a private organization that is independent of market traders, the Financial Accounting Standards Board, determines the standards for public disclosures.

Keywords: auditing, independence, market

JEL Classification: D41, D42, D82

Suggested Citation

Sarath, Bharat Sarrukai, Public Information Quality with Monopolistic Sellers (June 21, 1995). Games and Economic Behavior, Vol. 16, 1996. Available at SSRN: https://ssrn.com/abstract=2720084

Bharat Sarrukai Sarath (Contact Author)

Rutgers, The State University of New Jersey - Accounting ( email )

94 Rockafeller Road
Piscataway, NJ 08854
United States

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