False Modesty

24 Pages Posted: 16 Aug 2005 Last revised: 2 Nov 2017

See all articles by Rick Harbaugh

Rick Harbaugh

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Indiana University - Department of Economics

Ted To

Bureau of Labor Statistics

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

Harbaugh, Rick and To, Ted, False Modesty (July 1, 2005). Available at SSRN: https://ssrn.com/abstract=777924 or http://dx.doi.org/10.2139/ssrn.777924

Rick Harbaugh (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-2777 (Phone)
812-855-3354 (Fax)

HOME PAGE: http://www.bus.indiana.edu/riharbau/

Indiana University - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

Ted To

Bureau of Labor Statistics ( email )

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