False Modesty
24 Pages Posted: 16 Aug 2005 Last revised: 21 Nov 2022
Date Written: July 1, 2005
Abstract
Is it always wise to disclose good news? We find that the weakest senders with good news have the most incentive to boast about it if the receiver has any private information. Hence the act of disclosing good news can paradoxically make the sender look bad. Withholding good news is an equilibrium if standards for the news are sufficiently weak or prior expectations without the news are sufficiently favorable. Full disclosure is the unique equilibrium when standards are sufficiently difficult, when standards are sufficiently fine, or when prior expectations are sufficiently unfavorable. Since the sender has a legitimate fear of looking too anxious to reveal good news, mandating that the sender disclose the news can help the sender. The model's predictions are consistent with when faculty avoid using titles such as "Dr" or "Professor" in voicemail greetings and course syllabi.
Keywords: disclosure, persuasion, verifiable message, countersignaling
JEL Classification: D82, C78, M41, M45
Suggested Citation: Suggested Citation