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When to Drop a Bombshell

46 Pages Posted: 7 Oct 2016  

Gabriele Gratton

UNSW Australia Business School, School of Economics

Richard Holden

University of New South Wales (UNSW)

Anton Kolotilin

University of New South Wales (UNSW)

Date Written: September 10, 2016

Abstract

At an exogenous deadline, Receiver takes an action, the payoff from which depends on Sender’s private type. Sender privately observes if and when a bombshell arrives. Upon arrival, she chooses when to drop it, which starts a public flow of information about her type. Dropping the bombshell earlier exposes it to greater scrutiny, but signals credibility. We characterize the set of equilibria and show that Sender delays dropping the bombshell, and completely withholds it with positive probability. Our model provides an explanation for an “October Surprise” effect and generates further predictions about the dynamics of information disclosure during election campaigns. We find empirical support for these predictions in data on US presidential scandals.

Keywords: Information Disclosure, Strategic Timing, Bayesian Learning, Credibility vs. Scrutiny

JEL Classification: D72, D82, D83

Suggested Citation

Gratton, Gabriele and Holden, Richard and Kolotilin, Anton, When to Drop a Bombshell (September 10, 2016). UNSW Business School Research Paper No. 2016 ECON 13. Available at SSRN: https://ssrn.com/abstract=2843356

Gabriele Gratton (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Richard Holden

University of New South Wales (UNSW) ( email )

Sydney, NSW 2052
Australia

Anton Kolotilin

University of New South Wales (UNSW) ( email )

Sydney, NSW 2052
Australia

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