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Evidence and Skepticism in Verifiable Disclosure Games

57 Pages Posted: 5 Jun 2017 Last revised: 26 Jul 2017

Daniel Rappoport

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Date Written: July 25, 2017

Abstract

A shared feature of communication games with verifiable evidence is that the receiver is skeptical following any non-disclosure: he will believe that the message comes from an informed sender who is withholding unfavorable evidence. It then follows that when the receiver is more skeptical he will choose a less preferable action for the sender. This paper seeks to characterize when a change in the distribution of evidence induces any receiver to be more skeptical, i.e. take an action that is less favorable to the sender following any message. We introduce the ”more evidence” relation on prior distributions over types: a distribution has more evidence than another if sender types with larger available message sets are more probable in a monotone likelihood ratio sense. Our main result shows that the sender having more evidence is equivalent to an increase in receiver skepticism. We first show that this equivalence unifies many seemingly different comparative statics results from the verifiable disclosure literature. We then apply our analysis to a dynamic disclosure environment in which the sender obtains and discloses evidence gradually. Our result reveals when the receiver does not "benefit from dynamic disclosure" relative to the case in which evidence is disclosed only in the final period.

Keywords: Verifiable Disclosure, Hard Information, Monotone Likelihood Ratio Property, Comparative Statics, Skepticism

JEL Classification: D82,D83

Suggested Citation

Rappoport, Daniel, Evidence and Skepticism in Verifiable Disclosure Games (July 25, 2017). Available at SSRN: https://ssrn.com/abstract=2978288

Daniel Rappoport (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

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New York, NY 10025
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