Developing a Reputation for Reticence

42 Pages Posted: 9 Nov 2006 Last revised: 18 Dec 2009

Michael D. Grubb

Boston College

Multiple version iconThere are 2 versions of this paper

Date Written: December 17, 2009

Abstract

A sender who has disclosable information with probability less than one may partially conceal bad news by choosing to withhold information and pooling with uninformed types. The success of this strategy depends on receivers' beliefs about the probability that the sender has disclosable news. In a dynamic context, informed senders try to cultivate a reputation for reticence either by concealing good news along with the bad, or by concealing some good news and disclosing some bad news. A reputation for reticence is valuable because it makes receivers less skeptical of past or future non-disclosures. The model provides insight into the choice by firms such as Google not to disclose quarterly earnings guidance to analysts, as well as Tony Blair's reticence over his son's vaccine record during the MMR scare in the UK.

Keywords: verifiable disclosure, reputation, reticence

JEL Classification: D8

Suggested Citation

Grubb, Michael D., Developing a Reputation for Reticence (December 17, 2009). Available at SSRN: https://ssrn.com/abstract=934030 or http://dx.doi.org/10.2139/ssrn.934030

Michael D. Grubb (Contact Author)

Boston College ( email )

United States
617-552-1569 (Phone)

HOME PAGE: http://https://www2.bc.edu/michael-grubb/

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