Costly Voluntary Disclosure in a Signaling Game

Paul Pecorino () and Mark Van Boening

Review of Law & Economics, 2019, vol. 15, issue 2, 32

Abstract: We conduct an experimental analysis of pretrial bargaining, while allowing for the costly disclosure of private information in a signaling game. Under the theory, 100 % of plaintiffs with a weak case are predicted to remain silent, while 100 % of the plaintiffs with a strong case are predicted to voluntarily disclose their type. We find that 75 % of weak plaintiffs remain silent and 67 % of strong plaintiffs reveal their type. In line with theory, weak plaintiffs who reveal their type receive a lower payoff, while strong plaintiffs who reveal their type receive a higher payoff. Plaintiffs with a strong case who reveal their type have a dispute rate which is 50 % points lower than strong plaintiffs who remain silent. Because plaintiffs who reveal their type cannot extract the entire surplus from settlement from the defendant, the incentive to engage in voluntary disclosure is weaker empirically than it is in theory.

Keywords: experimental bargaining; asymmetric information; signaling game; voluntary disclosure (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1515/rle-2016-0074

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