Voluntary Disclosure of Precision Information

Posted: 21 Dec 2003

See all articles by John S. Hughes

John S. Hughes

University of California at Los Angeles

Suil Pae

affiliation not provided to SSRN

Abstract

This paper presents a model of an entrepreneur's acquisition and voluntary disclosure of precision information as a supplement to primary disclosure of an estimate of a tradable asset's value. Our analysis shows that equilibrium disclosure can be characterized by four regions. For estimates above (below) the prior expectation of the asset value, the entrepreneur discloses only high (low) precision information. The main idea is to enhance (diminish) confidence in estimates that improve upon (detract from) prior beliefs. We further show that the entrepreneur over-invests in the acquisition of precision information due to the option value of discretion over disclosure.

Keywords: precision information, voluntary disclosure, efficiency

JEL Classification: D61, G14, M41, M45

Suggested Citation

Hughes, John S. and Pae, Suil, Voluntary Disclosure of Precision Information. Available at SSRN: https://ssrn.com/abstract=482041

John S. Hughes (Contact Author)

University of California at Los Angeles ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-794-9553 (Phone)
310-267-2193 (Fax)

Suil Pae

affiliation not provided to SSRN

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