Voluntary Disclosure of Information

Jong Haak Hong
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Jong Haak Hong: Kyungwon University

Korean Economic Review, 1993, vol. 9, 115-126

Abstract: This paper considers a "persuasion game", in which a better informed agent (seller) strategically reveals his private information in an attempt to influence a decision maker (buyer). For this class of games, Grossman (1981) and Milgrom (1981) independently showed that in equilibrium the seller fully reveals his private information. A caution is provided in interpreting their results. It might be very easy to verify disclosed information but it is often difficult to detect the possession and hence the withholding of information. By simply introducing the possibility that the seller has no information, we conclude that only private information favorable to the seller is revealed to the buyer. Given the result, effects of disclosure rules are studied. Disclosure rules always benefit the buyer by enlarging his choice set, as well as transfer uncertainty from the buyer to the seller.

Date: 1993
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