Forced Information Disclosure and the Fallacy of Transparency in Markets

16 Pages Posted: 5 Jun 2006

See all articles by Timothy N. Cason

Timothy N. Cason

Purdue University - Krannert School of Management

Charles R. Plott

California Institute of Technology - Division of the Humanities and Social Sciences

Abstract

A theory advanced in regulatory hearings holds that market performance will be improved if one side of the market is forced to publicly reveal preferences. For example, wholesale electricity producers claim that retail electricity consumers would pay lower prices if wholesale public utility demand is disclosed to producers. Experimental markets studied here featured decentralized, privately negotiated contracts, typical of the wholesale electricity markets. Two conclusions emerge: (1) such markets generally converge to the competitive equilibrium and (2) forced disclosure works to the disadvantage of the disclosing side. Information disclosure would result in higher wholesale and thus higher retail electricity prices. (JEL L50, L94, D43)

Suggested Citation

Cason, Timothy N. and Plott, Charles R., Forced Information Disclosure and the Fallacy of Transparency in Markets. Economic Inquiry, Vol. 43, Issue 4, pp. 699-714, 2005. Available at SSRN: https://ssrn.com/abstract=906345

Timothy N. Cason (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-1737 (Phone)

Charles R. Plott

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
337 Baxter Hall
Pasadena, CA 91125
United States
626-395-4209 (Phone)

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