Voluntary Disclosure of Nonproprietary Information: A Complete Equilibrium Characterization
Posted: 14 Jan 2004
The so-called disclosure principle is a 'puzzle' in the accounting literature: Game theoretic models of financial markets show that in equilibrium firms should disclose all their private information. Yet, the result is not convincing. Researchers have therefore built sophisticated models in order to demonstrate for which reasons the disclosure principle might fail. This note shows that even in the original model there are multiple equilibria. In those equilibria good types disclose and bad types do not. The commonly known full disclosure equilibrium is a limit point of the equilibrium set.
Keywords: disclosure, nonproprietary information, perfect Bayesian equilibria
JEL Classification: M4, G14, C72
Suggested Citation: Suggested Citation