Do Good and Talk About It! Disclosure and Reward of Discretionary Kindness

Abstract

We analyze the consequences of endogenous disclosure of discretionary kind behavior in a two player game with asymmetric information. The first player’s choice set, which is his private information, is randomly determined; he can either behave kindly or unkindly towards the second player (kindness is discretionary) or he is restricted to kind behavior. At some cost, the first player can truthfully inform the second player about the available choice set. We find that first players who behave kindly more often inform the second player if their kindness is discretionary. Endogenously disclosing discretionary kindness significantly triggers second players’ rewards. Our findings are robust towards variations in first players’ costs of disclosure and second players’ payoffs. Behavioral findings translate into a variety of real-world settings.

Keywords: Conflict of Interest, Information Asymmetry, Kindness, Endogenous Disclosure, Positive Reciprocity

JEL Classification: C91, D82