Silence is Safest: Non-Disclosure When the Audience's Preferences are Uncertain
43 Pages Posted: 26 Feb 2018 Last revised: 25 Oct 2018
Date Written: October 22, 2018
We examine voluntary disclosure in a setting where the would-be discloser (“sender”) is risk-averse and uncertain about the audience’s (“receiver’s”) preferences. We show that some senders stay silent in equilibrium, in contrast to classic “unravelling” results. Non-disclosure reduces the sensitivity of a sender’s payoff to receivers’ preferences, which is attractive to risk-averse senders, i.e., “silence is safest.” Increases in sender risk-aversion reduce disclosure by sender-types who bear a higher risk under disclosure. In contrast, non-disclosure imposes risk on receivers, and consequently, increases in receiver risk-aversion increase disclosure. We discuss a variety of applications.
Keywords: information disclosure, risk aversion, uncertainty, preferences
JEL Classification: D81, D82, D83, G14
Suggested Citation: Suggested Citation