Silence is Safest: Non-Disclosure When the Audience's Preferences are Uncertain

43 Pages Posted: 26 Feb 2018 Last revised: 25 Oct 2018

See all articles by Philip Bond

Philip Bond

University of Washington - Michael G. Foster School of Business

Yao Zeng

University of Washington - Michael G. Foster School of Business

Date Written: October 22, 2018

Abstract

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

Bond, Philip and Zeng, Yao, Silence is Safest: Non-Disclosure When the Audience's Preferences are Uncertain (October 22, 2018). Available at SSRN: https://ssrn.com/abstract=3124106 or http://dx.doi.org/10.2139/ssrn.3124106

Philip Bond

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Yao Zeng (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://sites.google.com/site/yaozengwebsite/

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