Coordinated Inattention and Disclosure Complexity

66 Pages Posted: 10 May 2023 Last revised: 26 Feb 2024

See all articles by Hong Qu

Hong Qu

Kennesaw State University - Michael J. Coles College of Business

Jared Williams

University of South Florida

Ran Zhao

Peking University

Anthony M. Kwasnica

Florida State University - Department of Economics; Smeal College of Business

Date Written: November 3, 2023


We examine a beauty contest game with an option to analyze an additional disclosure. We analytically prove that in some scenarios, coordination incentives cause sophisticated players who can comprehend disclosures to choose not to analyze them to match unsophisticated players’ actions, a phenomenon we call “coordinated inattention.” Laboratory experiments provide support for the coordinated inattention mechanism: Coordination incentives reduce sophisticated subjects’ propensity to analyze disclosures, especially when they believe others are unlikely to comprehend them. We further find that psychological biases help reduce coordinated inattention. Subjects are overconfident, sophisticated subjects overestimate others’ ability to comprehend disclosures, and both biases are associated with a higher tendency to analyze disclosures. Our analysis suggests that unsophisticated decision makers’ inability to comprehend complex disclosures has a negative spillover effect by reducing sophisticated decision makers’ attention to disclosures. Our results highlight the importance of the SEC’s and FASB’s recent efforts to make disclosures easier to comprehend.

Keywords: information acquisition, coordination game, complexity, investor sophistication, false consensus effect, overconfidence

Suggested Citation

Qu, Hong and Williams, Jared and Zhao, Ran and Kwasnica, Anthony Mark, Coordinated Inattention and Disclosure Complexity (November 3, 2023). Available at SSRN: or

Hong Qu

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

HOME PAGE: http://

Jared Williams (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

Ran Zhao

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871

Anthony Mark Kwasnica

Florida State University - Department of Economics ( email )

Tallahassee, FL 30306-2180
United States

Smeal College of Business ( email )

Department of Risk Management
332 Business Building
University Park, PA 16802-3306
United States

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